Oracle buys Sun for US$5.6bn

20 Apr 2009

After IBM let the ball drop, business software giant Oracle has swooped in to buy server and software player Sun Microsystems for US$5.6bn.

The companies announced this afternoon that they have entered into a definitive agreement under which Oracle will acquire Sun common stock for US$9.50 per share in cash.

The transaction is valued at approximately US$7.4bn, or US$5.6bn net of Sun’s cash and debt.

“We expect this acquisition to be accretive to Oracle’s earnings by at least 15 cents on a non-GAAP (generally accepted accounting principles) basis in the first full year after closing,” said Oracle president, Safra Catz.

“We estimate that the acquired business will contribute over US$1.5bn to Oracle’s non-GAAP operating profit in the first year, increasing to over US$2bn 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,” Catz added.

The deal is understood to have been unanimously accepted by Sun’s board of directors.

“The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems,” said Oracle CEO Larry Ellison (pictured).

“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.”

There are substantial long-term strategic customer advantages to Oracle owning two key Sun software assets: Java and Solaris. Java is one of the computer industry’s best-known brands and 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 said it can now ensure continued innovation and investment in Java technology for the benefit of customers and the Java community.

The Sun Solaris operating system is the leading platform for the Oracle database, Oracle’s largest business, and has been for a long time.

Ellison said that with the acquisition of Sun, Oracle can optimise the Oracle database for some of the unique, high-end features of Solaris, and added that Oracle is as committed as ever to Linux and other open platforms.

“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.”

By John Kennedy

Pictured: Oracle CEO, Larry Ellison