AfterDawn: News

Oracle to buy Sun Microsystems for $7.06 billion

Oracle is jumping straight into the computer hardware market with an announced purchase of Sun Microsystems Inc. for $7.06 billion. The announcement spurred surprise and shock in the industry, as many wonder if Oracle can boost profitability at Sun's hardware unit in fierce competition with IBM, Hewlett-Packard, Dell etc.

"It's an out-of-the-box, left-field type of a deal because Oracle is buying a predominantly hardware business," said Jefferies & Co analyst Ross MacMillan. "The push-pull of the deal is the uncertainty of the hardware business with the earnings accretion of the software business."



Sun had previously rejected a bid from IBM, which was offering $9.40 a share. Oracle will pay $9.50 a share, valuing the company at about $7.06 billion. The news pushed shares of Sun Microsystems by 35.7 percent in morning trading. Safra Catz, Oracle President, said on a conference call that the company does intend to make Sun's hardware division profitable.

"The deal would strengthen Oracle's position against IBM. Oracle has done a good job on acquisitions it has done earlier," said Robert Jakobsen, analyst at Jyske Bank in Copenhagen. "It makes sense also historically. Oracle has been more successful commercializing software than Sun."

Sun will add $1.5 billion to Oracle's operating profit in the first year, and it will rise to $2 billion by the second year, according to Oracle.

Written by: James Delahunty @ 20 Apr 2009 19:09

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• 3 comments

• DXR88

  I hope Sun Micro Systems will retain its name and trademark.
  
  I never Did like Oracles little Games...

  20.4.2009 21:56 #1

• cart0181

  I guess you could say I'm one of the shocked ones the article mentions. I hope Sun maintains its originality in all of this. Sure, the stock is up today, but we'll see what it does. Me, I guess I'm glad I didn't invest like I intended to. If I had the money, I probably would have.
  
  
  Quote:Sun will add $1.5 billion to Oracle's operating profit in the first year, and it will rise to $2 billion by the second year, according to Oracle.Okay, so they're planning on this deal paying itself off in less than 5 years for Oracle. A lot less if the second part of that cocky comment by Oracle proves true.

  21.4.2009 02:52 #2

• grkblood

  This was the talk at work yesterday, I wonder how this will effect sun systems. This isnt Oracle's realm at all. I guess the freeware databases might finally be catching up to Oracle and hurting their pockets. MySQL ftw!!!

  21.4.2009 08:45 #3