Software
The deal would end Suns 27-year history as Silicon Valleys brash independent and shake up the computing industry. It comes after a monthlong drama that entered its final chapter last week.
IBM had retracted an earlier buyout offer for Sun after the two sides couldnt agree on key details. Last Thursday, Sun reached out to longtime business ally Oracle to make a bid, two people familiar with the discussions told The Associated Press. These people spoke on condition of anonymity because the details of the talks were considered confidential.
Once Oracle entered the fray, Sun tried to turn up the heat on IBM, which resubmitted its previous offer, only to be outdone by Oracles latest power play. Now Oracle, traditionally a business software maker, will be the company that tries to use Suns assets to build a more comprehensive one-stop technology shop.
“With the acquisition of Sun, Oracle is now able to make all of the pieces of the technology stack fit together and work well,” Oracle Chief Executive Larry Ellison said during a Monday conference call.
The deal would give Oracle ownership of the Java programming language, which runs on more than 1 billion devices around the world. Oracle also would take charge of the Solaris operating system, which already has been a platform for much of Oracles products.
Its far from Oracles biggest acquisition during a four-year shopping spree that has cost more than $40 billion, but it may be the boldest. Oracle, a Redwood Shores, Calif.-based business software maker, will be branching more into data storage and computer hardware.
Jonathan Schwartz, Suns CEO, predicted the combination will create a “systems and software powerhouse” that “redefines the industry, redrawing the boundaries that have frustrated the industrys ability to solve.” Among other things, he predicted Oracle will be able to offer its customers simpler computing solutions at less expensive prices by drawing upon Suns technology.
Oracle will pay $9.50 in cash for each Sun share. The price represents a 42 percent premium to Suns closing stock price of $6.69 on Friday, and is about twice what Sun was trading for in March, before word leaked that IBM and Sun were in buyout negotiations. Net of Suns cash and debt, the transaction is valued at $5.6 billion, Oracle said.
IBM had offered to buy Sun for $9.40 per share, but acquisition talks fell apart this month in a disagreement over price and the extent to which IBM was willing to see the deal through an antitrust review.
Shares of Sun jumped $2.46, or 37 percent, to $9.15 in Monday afternoon trading while Oracle shares shed 42 cents, or 2.2 percent, to $18.64. IBM shares fell 85 cents to $100.43.
Some of Oracles earlier acquisitions have resulted in a significant number of layoffs. In Mondays conference call, Oracle didnt discuss how the deal would affect jobs. Oracle employs about 86,000 people worldwide while Sun has about 33,000 workers.
Sun, which invented the Java programming language used to develop applications for Web sites, mobile phones and even DVD players, had been reluctant to sacrifice its independence, even as it reported big losses. Despite billions in sales – $13.3 billion over the last four quarters – the company has not been able to turn a consistent profit, losing $1.9 billion in the same period.
If Oracle can hit those targets, Sun would yield more profit than the combined contributions of three other major acquisitions – PeopleSoft Inc., Siebel Systems Inc. and BEA Systems – that cost Oracle a total of more than $25 billion.
A deal with Oracle might not be plagued by the same antitrust issues that could have loomed over IBM and Sun, since there is significantly less overlap between the two companies. Still, Oracle could be able to use Suns products to enhance its own software.
Oracles main business is database software. Suns Solaris operating system is a leading platform for that software. The company also makes “middleware,” which allows business computing applications to work together. Oracles middleware is built on Suns Java language and software.
Calling Java the “single most important software asset we have ever acquired,” Ellison predicted it would eventually help make Oracles middleware products generate as much revenue as its database line does.
Suns takeover is a reminder that a few missteps and bad timing can cause a star to come crashing down.