Oracle to acquire Sun for $7.4 billion

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After weeks of “will they or won't they?” speculation on whether IBM would purchase Sun Microsystems, Oracle Corp. has swooped in and entered an agreement to acquire Sun for $7.4 billion, or $5.6 billion net of Sun's cash and debt. Oracle is billing the acquisition as “an industry changing event.”

The acquisition — which combines the enterprise software of Oracle with the enterprise systems of Sun — is expected to help Oracle deliver completely integrated and better-performing products at a lower cost to consumers. The deal also creates a massive partner community primed to drive the growth of open source systems.

“This acquisition combines best-in-class enterprise software and mission-critical computing systems,” wrote Oracle president, Charles Phillips, in a letter to customers and partners. “Oracle plans to engineer and deliver an integrated system — applications to disk — where all the pieces fit and work together so customers do not have to do it themselves. Customers benefit as their systems integration costs go down while system performance, reliability, and security go up.”

Of particular importance in this plan are Sun's flagship products, Java and Solaris. Oracle, which has built its Fusion Middleware on top of Java's language and software, plans to invest more in Java to accelerate its growth. Solaris, already the top platform supporting the Oracle database, will be maintained as an industry standard operating system for Oracle, and Oracle's database products will be further optimized to work with Solaris.

Oracle claimed $24 billion in revenue for the 12 months ending Feb. 28. It has 86,500 employees and 320,000 customers worldwide. Sun's 2008 12-month earnings reached $13 billion. The company has 30,000 employees and 47,000 enterprise customers worldwide.

The two companies already share many enterprise clients, including the US Army, Sprint, BP, Citi, VW, Boeing and Google. Sun customers will now have access to Oracle support.

Oracle will pay Sun common stock for $9.50 per share — 42% more than its $6.69 closing price on Friday. Sun stock prices as of this writing are hovering around $9.10. The acquisition has been approved by Sun's board but is still subject to Sun stockholder approval, certain regulatory approvals and customary closing conditions. It is expected to close this summer.

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