Oracle Corporation is to buy Sun Microsystems for $9.50 a share in a deal valued at approximately $7.4 billion, just a few weeks after a deal by IBM to buy Sun fell apart. It looks like Oracle will pay a premium of $2.81 a share, or 42%, over Sun Micro’s closing price of $6.69 a share on Friday.
Oracle said the deal is valued at $5.6 billion excluding cash and debt. Oracle is calling Sun’s Java “the most important software” it has ever acquired. The deal, which is expected to close in the Summer and was unanimously approved by Sun’s board of directors, has massive implications for the future openness of Java and MySQL.
As the NY Times points out, Oracle and Sun are two heavyweights that have been partners for more than 20 years, even if Oracle has been distancing itself a bit from Sun’s server line in favor of competitors like HP and Dell lately because of Sun’s business decline. As a result of this deal, Oracle will now become a behemoth in both the software and the hardware market, and the implications this acquisition will have on the its closest rivals and the market in general will be noticable for years to come.
The official release, with emphasis ours:
Oracle to Buy Sun
SANTA CLARA, Calif. April 20, 2009 Sun Microsystems (NASDAQ: JAVA) and Oracle Corporation (NASDAQ: ORCL) announced today they have entered into a definitive agreement under which Oracle will acquire Sun common stock for $9.50 per share in cash. The transaction is valued at approximately $7.4 billion, or $5.6 billion 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 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 Oracle President Safra Catz.
“The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems,” said Oracle CEO Larry Ellison. “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 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. With the acquisition of Sun, Oracle can optimize the Oracle database for some of the unique, high-end features of Solaris. Oracle is as committed as ever to Linux and other open platforms and will continue to support and enhance our strong industry partnerships.
“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.”
“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 a pioneer in enterprise computing, and this combination recognizes the innovation and customer success the company has achieved. Our largest customers have been asking us to step up to a broader role to reduce complexity, risk and cost by delivering a highly optimized stack based on standards,” said Oracle President Charles Phillips. “This transaction will preserve and enhance investments made by our customers, while we continue to work with our partners to provide customers with choice.”
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.
There will be a conference call today to discuss the transaction at 5:30 a.m. Pacific time. Investors can listen to the conference call by dialing (719) 234-7870, passcode 923645. A replay will be available for 24 hours after the call ends at (719) 884-8882, passcode: 923645. A live audio webcast of the call will be made available at www.oracle.com/investor and a replay will be available for seven days after the call ends.
About Oracle
Oracle (NASDAQ: ORCL) is the world’s largest enterprise software company. For more information about Oracle, please visit our Web site at http://www.oracle.com.
About Sun Microsystems, Inc.Sun Microsystems develops the technologies that power the global marketplace. Guided by a singular vision — “The Network is the Computer” — Sun drives network participation through shared innovation, community development and open source leadership. Sun can be found in more than 100 countries and on the Web at http://sun.com.
Comment