Oracle Buys Sun Microsystems

Tuesday, April 21, 2009: Oracle Corporation has agreed to buy California-headquartered Sun Microsystems in a $7.4 billion (or $9.50 per share) deal. Sun's acquisition by Oracle caught many in the industry by surprise as the deal came just two weeks after IBM abandoned its bid to buy Sun. According to analysts, the deal strengthens Oracle's position against IBM and HP for dominance of the server and storage markets.
Kapil Dev Singh, country manager, IDC India, said, "The Oracle-Sun merger brings together two strong brands with strengths in software and hardware space with the combined entity aspiring to make a mark in the enterprise IT space. Sun's strong computing platform and Oracle's middleware and database platforms will make Oracle's IT infrastructure offering stronger. What brings added value is their consolidated face as part of the bigger IT infrastructure offering in an environment where individually these components are a commodity."

"Oracle-Sun's competitive positioning in telecom and BFSI space will strengthen as individually both players have a strong presence in these segments that contribute about one-third of India's domestic IT market. The challenge for the merged entity lies in how well it can convince CIOs keen on leveraging their IT investments that is completely a services play. With applications, middleware and hardware piece in place, the services capability seems to be missing. This is important considering that the IT consolidation wave in enterprise space in general, and telecom and BFSI segments in particular, is slowly giving way to IT leverage wave. This deal seems to be little late from that perspective," he added.

There are substantial long-term customer advantages to Oracle owning two key Sun software assets: Java and Solaris. Java is one of the most widely deployed technologies, and it is the most important software Oracle has ever acquired. Oracle Fusion Middleware, Oracle’s fastest growing business, is built on top of Sun’s Java language and software. Oracle can now ensure continued investment in Java technology for the benefit of customers and the Java community.

The Sun Solaris operating system is claimed to be the leading platform for the Oracle database, Oracle’s largest business, and has been for a long time. With the acquisition of Sun, Oracle can optimise the Oracle database for some of the high-end features of Solaris. Oracle says it is as committed as ever to Linux and other open platforms and will continue to support and enhance our strong industry partnerships.

“We expect this acquisition to be accretive to Oracle’s earnings by at least 15 cents on a non-GAAP basis in the first full year after closing. We estimate that the acquired business will contribute over $1.5 billion to Oracle’s non-GAAP operating profit in the first year, increasing to over $2 billion in the second year. This would make the Sun acquisition more profitable in per share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft and Siebel combined,” said Safra Catz, president, Oracle.

“The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems,” said Larry Ellison, CEO, Oracle. “Oracle will be the only company that can engineer an integrated system – applications to disk – where all the pieces fit and work together so customers do not have to do it themselves. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up.”

“Oracle and Sun have been industry pioneers and close partners for more than 20 years,” said Sun Chairman Scott McNealy. “This combination is a natural evolution of our relationship and will be an industry-defining event.”

Jonathan Schwartz, CEO, Sun, “From the Java platform touching nearly every business system on earth, powering billions of consumers on mobile handsets and consumer electronics, to the convergence of storage, networking and computing driven by the Solaris operating system and Sun’s SPARC and x64 systems. Together with Oracle, we’ll drive the innovation pipeline to create compelling value to our customer base and the marketplace.”

The board of directors of Sun Microsystems has unanimously approved the transaction. It is anticipated to close this summer, subject to Sun stockholder approval, certain regulatory approvals and customary closing conditions.