Oracle to Buy Sun Microsystems

Following the collapse of talks with IBM earlier this month Oracle has stepped in to acquire Sun Microsystems for $7.4bn or $9.50 a share in an all cash transaction.  This is a substantially higher valuation than IBM’s rumored price of $6.85bn.  In a statement Oracle claims that the boards of both firms have approved the deal which is expected to complete in the summer subject to regulatory approval. Oracle CEO Larry Ellison stated:

"The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems. 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."

The deal offers substantial additional revenue to Oracle, according President Safra Catz:

"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,"

There is currently very limited information available as to what Oracle plans to do with either the hardware business the drives much of Sun’s revenue, Sun’s open source software offerings such as MySQL, GlassFish, NetBeans and JavaFX, or the Java Community Process which has been central to the way Sun has managed Java's evolution, but both Sun Chairman Scott McNealy and Sun's CEO Jonathan Schwartz have issued upbeat statements. Jonathan Schwartz has been quoted as saying:

"This is a fantastic day for Sun's customers, developers, partners and employees across the globe, joining forces with the global leader in enterprise software to drive innovation and value across every aspect of the technology marketplace," said Jonathan Schwartz, Sun's CEO, "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."

Sun is the latest in a number of large scale acquisitions for Oracle.  In recent years the enterprise computing giant has also acquired Siebel, PeopleSoft and BEA Systems. If Oracle is able to sell Sun's hardware business on, perhaps to Fujitsu, Oracle will have made an important acquisition as a very low price.