Oracle offered $7.4 billion for Sun after IBM walked away

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Apr 20 2009
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After IBM walked away from the initial deal to acquire Sun Microsystems, it’s Oracle turn to offer the company for $9.50 a share or about $7.4 billion. Earlier Sun Microsystems was kinda outraged that IBM lowered the offer price from $10 to $9.40 a share. Interestingly both Oracle and Sun Microsystems were the leaders during the internet dot com boom and both are allies – any new release of Oracle database or Sun Solaris would be tested in the lab so that they would work on each other platform. Oracle was once so successful that its founder Larry Ellison has almost taken over from Microsoft Bill Gates as the richest man on planet Earth.

It was reported that Sun Microsystems’ directors have unanimously approved the transaction. Sun Microsystems anticipated the deal to be closed this summer, subject to Sun stockholder approval. Oracle said it expected the purchase to add at least 15 cents a share or roughly $1.5 billion to its adjusted earnings or profit in the first year and more than $2 billion in the second year. If the these figures are achieved, Sun would actually yield more profit than the combined contributions of three other major acquisitions by Oracle – PeopleSoft Inc., Siebel Systems Inc. and BEA Systems, of which Oracle had forked out a total of more than $25 billion. This would make Sun Microsystems’ acquisition very attractive indeed.

The deal will end Sun’s 27-year history as Silicon Valley’s brash independent and give Oracle ownership of the Java programming language, which runs on more than 1 billion devices around the world. With the acquisition Oracle is expected to venture into storage and computer hardware as it accelerates its attempts to become a one-stop technology shop for more than 300,000 corporate, government and academic customers. As usual the question would be the number of excessive staffs to be axed – Oracle employs about 86,000 people worldwide while Sun has about 33,000 workers.

Unlike earlier deal-talk with IBM, Oracle-Sun might not be plagued by the same antitrust issues since there is significantly less overlap between the two companies. Sun Microsystems which during its glory day commanded market value of about $200 billion will definitely add more value to Oracle than to IBM. But it’s too early to say it’s a done deal and if this deal fell off again, would other players such as EMC knock on Sun’s door?

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