April 20th, 2009 by Joshua Weinberger

Here’s Lauren McKay’s news story on the acquisition, We’ll have more on this later, of course — over on destinationCRM.com — but for the time being, here’s the skinny and below are some relevant links and excerpts.

• Oracle’s own press release. [Note: Oracle’s servers have been returning error messages for this.]

In case the problem’s persisting, here’s that same press release, carried on an aggregator site.

Sun Microsystems, Inc. (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. 

“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.

Nowhere in there, however, does anyone mention Oracle’s own Exadata hardware, launched to great fanfare at Oracle OpenWorld ’08 back in September.
More after the jump…

• Here’s the Bloomberg News dispatch, already (as of 9.09a ET) up to Update 1, with others likely to follow.

“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,” [Oracle President Safra] Catz said. “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.”

During this morning’s conference call with media and analysts — archived here — Catz characterized the Sun deal as being bigger than the acquisition of Hyperion Solutions, but smaller than either of the deals for PeopleSoft or Siebel Systems.

The agreement with Oracle came about two weeks after I.B.M. ended its talks with Sun. The Sun board balked at that deal after I.B.M. lowered its offer to $9.40 a share from $10.

Still, Monday’s deal represented a 42 percent premium over Sun’s closing price of $6.69 on Friday. Oracle and Sun said in a statement that net of Sun’s cash and debt, the deal was valued at $5.6 billion.

Lawrence J. Ellison, Oracle’s co-founder and chief executive, and Scott G. McNealy, Sun’s co-founder and chairman, have been two of Silicon Valley’s closest allies over the last 20 years. Their companies turned into two of the superstars of the Internet build out, and both executives made ribbing rival Microsoft a favored pastime.

Historically, most of Oracle’s database sales have occurred in tandem with Sun’s servers. Over the past few years, however, Oracle has moved to make Hewlett-Packs and Dell stronger allies, as Sun’s business has declined.

• Wall Street Journal:

Oracle’s Fusion Middleware business is based on Sun’s Java language and software, and Oracle said it could now ensure continued investment in the technology. It will also acquire the Solaris operating system, the leading platform for its database business, which is its largest.

• The Associated Press, via MSNBC:

IBM had offered to buy Sun for $9.40 per share, but acquisition talks fell apart earlier this month. Sun balked at the price and canceled IBM’s exclusive negotiating rights, leading IBM to withdraw its offer….

The IBM talks may have been derailed by antitrust issues since the two companies overlap in several areas. In tape-based data storage, for example, together IBM and Sun would hold 52 percent of a $3.1 billion market.

• ZDnet:

On a conference call with analysts, Ellison said that Oracle’s acquisitions to date has been to acquire market leaders—PeopleSoft, Hyperion and Siebel. With Sun, Oracle said Java and Solaris are the keepers in the deal. Regarding Java, Ellison said it wanted Sun so it could own the building blocks for its middleware.


Wall Street Journal blogpost [with a h/t to a PR person who knows my gratitude even if she doesn’t want her name used in public]:

“There is no question in my mind that this transaction redefines the industry,” Scott McNealy, Sun’s chairman and co-founder, said during the conference call….

“We have a track record of integrating acquisitions very quickly, and this will be no different,” said Safra Catz, one of two Oracle presidents under Mr. Ellison.

Some analysts said they were stunned by the move, since Oracle has long left it to others to build computers while concentrating on the more-profitable software business. Last year, when it began offering a server integrated with its database software, it did so through an alliance with Hewlett-Packard.

“The last thing you expected was a database-software company to buy a hardware customer base,” said Bruce Richardson, an analyst at AMR Research in Boston. “It’s shocking.”

Also, here’s Beagle Research cofounder and managing principal Denis Pombriant — a longtime CRM magazine columnist — guest-blogging for us on this topic.
UPDATE, 4/20/09, 5p ET:
CNET News’ Ina Fried is reporting that IBM was “blindsided” by the news, and Microsoft Chief Executive Officer Steve Ballmer was caught at an uncharacteristic loss for words:

But apparently Ballmer, who is rarely at a loss for words, didn’t exactly have a sound byte [sic] at the ready. “I need to think about it,” Ballmer told reporters in Moscow, according to Reuters. “I am very surprised.”

I’m hearing that Ballmer wasn’t the only one surprised by Monday’s deal. According to a source of mine, IBM hadn’t given up on purchasing Sun and was blindsided by Oracle’s move.

Was this before or after Obama and the Feds announced they were pushing to tax all ecommerce on the Internet? I’m sure net-retailers will upgrade MySQL/Java solutions less as their profit margins decrease.


Comment by Jordan — — April 20, 2009 @ 2:03 pm

A survey conducted by Citigroup amongst major institutional investors provided the following insight on todays markets:
The favored sector is Tech and this sector has held the top position over the last 12 months. Growth stocks are also a hot item of late, the market sees the economy in a more positive view for the second half ofthe year and this should bode well for growth stocks. An additional upside of 6% is expected from current market levels to the end of the year. The majority of this optimism is due to the market rally since March, investors believe the market has bottomed. Regardless of the expected drop (approximately 20%) in earnings this year, a common consensus is the rebound in 2010 will be in the double digits. I’m certain Oracle has this information in mind prior to its acquisition.

Comment by thevoice@voicedup.com — — April 20, 2009 @ 8:10 pm

Sun had no hope of survival by the late 1990s when McNeely Locked-in on selling “boxes” and stopped listening to the marketplace. Sun created huge value with Solaris and Java, but had no idea how to capture that value so it just kept doing what it always did. Eventually, the market didn’t see the value in the boxes any more, and the value of Solaris and Java had been frittered away. A lesson for any company that it must adapt to market needs or it will be squashed. Read more at http://WWW.ThePhoenixPrinciple.com

Comment by adam hartung — — April 21, 2009 @ 9:53 pm

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