Oracle reaches agreement to purchase Sun


— 10:34 AM on April 20, 2009

Rumored acquisition talks between Sun and IBM may have petered out, but it certainly didn't take long for Sun to find another buyer. The Silicon Valley company announced earlier this morning that Oracle has agreed to purchase it for $7.4 billion. Sun's board has already given its nod of approval, and the transaction is on track to close this summer.

Oracle intends to pay about $9.50 in cash for each of Sun's shares. According to the Associated Press, that's slightly more than the $9.40 per share IBM offered. Sun also believed IBM's offer gave it too much room to buckle under pressure from regulatory bodies—and that could have been a problem, since the deal would have united two of the world's biggest server vendors.

Sun may not face that problem with Oracle, but why merge with it in the first place? The two companies make their motives pretty clear in the joint press release:

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.

The Sun Solaris operating system is the leading platform for the Oracle database, Oracle's largest business, and has been for a long time. With the acquisition of Sun, Oracle can optimize the Oracle database for some of the unique, high-end features of Solaris. Oracle is as committed as ever to Linux and other open platforms and will continue to support and enhance our strong industry partnerships.

Oracle President Safra Catz also estimates that, in the year following the acquisition, Sun will contribute $1.5 billion to Oracle's operating income. That will rise to $2 billion in the second year. Catz is talking about non-GAAP figures, though, so Oracle's official bottom line might not grow quite that much.

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