Oracle steps in to buy Sun for $7.4B
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The deal brings Sun's 27-year history to an end, giving Oracle ownership of its Java programming language, which runs on more than 1 billion devices around the world. Oracle also will take charge of the Solaris operating system.
Sun's board of directors has unanimously accepted the offer, which is still subject to regulatory approval. The move comes after Sun previously rejected a $7 billion bid from IBM as too low.
Oracle said it expects the acquisition to be accretive to its earnings by at least 15 cents on a non-GAAP basis in the first full year after closing. Many believe the company can boost profitability at Sun's software businesses but question its success with Sun's hardware unit amid stiff competition against IBM, Hewlett-Packard Co, Dell and Cisco Systems.
"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. 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," said Oracle President Safra Catz.
The deal also represents a bold move by Oracle, as it comes at time when companies selling hardware and software to big businesses are looking for trouble and competing with former partners as the recession hammers IT spending, reported Forbes.
"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," said Oracle CEO Larry Ellison.