After IBM dalliance, Sun goes to Oracle for $7.4 billion

The deal would give Oracle ownership of the Java programming language, which runs on more than 1 billion devices around the world.

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April 21, 2009 09:37
2 minute read.

 
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Oracle Corp. snapped up computer server and software maker Sun Microsystems Inc. for $7.4 billion Monday, trumping rival IBM Corp.'s attempt to buy one of Silicon Valley's best known - and most troubled - companies. The deal would end Sun's 27-year history as Silicon Valley's 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 couldn't 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. Once Oracle entered the fray, Sun tried to turn up the heat on IBM, which resubmitted its previous offer, only to be outdone by Oracle's latest power play. Now Oracle, traditionally a business software maker, will be the company that tries to use Sun's 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 Oracle's products. It's far from Oracle's biggest acquisition during a four-year shopping spree that has cost more than $40b., but it may be the boldest. Oracle, a Redwood Shores, California-based business software maker, will be branching more into data storage and computer hardware. Jonathan Schwartz, Sun's CEO, predicted the combination will create a "systems and software powerhouse" that "redefines the industry, redrawing the boundaries that have frustrated the industry's 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 Sun's technology. Oracle will pay $9.50 in cash for each Sun share. The price represents a 42 percent premium to Sun's 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 Sun's cash and debt, the transaction is valued at $5.6b., 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%, to $9.15 in Monday afternoon trading, while Oracle shares shed 42 cents, or 2.2%, to $18.64. IBM shares fell 85 cents to $100.43. Some of Oracle's earlier acquisitions have resulted in a significant number of layoffs. In Monday's conference call, Oracle didn't 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 - $13.3b. over the last four quarters - the company has not been able to turn a consistent profit, losing $1.9b. in the same period.

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