Two weeks after IBM’s deal with Sun Microsystems fell through, Oracle scoops up Sun for $7.4B.
The Oracle Corporation, the technology information company, announced Monday that it would acquire a rival, Sun Microsystems, for $9.50 a share, or about $7.4 billion.
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 their rival Microsoft a favored pastime.
The deal immediately disrupts the traditional relationships formed between some of the technology industry’s largest players and thrusts Oracle into the hardware business.
Oracle, for example, has long-standing partnerships with Sun’s rivals, including Hewlett-Packard and Dell. These sellers of server computers work to fine tune Oracle’s database and business software for their computers.
I.B.M., which competes against Oracle in the software market, also comes under new threats with the deal.
For years, I.B.M. has used its homemade servers as leverage for selling higher-profit database and business software. With Sun, Oracle opens up the same opportunity and gains access to thousands of existing Sun customers.
In addition, Oracle has now obtained the MySQL database, which Sun acquired last year for $1 billion. The open-source software has proved popular with companies looking to expand their Internet operations.
Last year, Oracle began a flirtation with the hardware market. It started reselling a server computer from H.P. that relied on its software for managing and analyzing large volumes of data.
This deal has a lot of synergies for Oracle. I think the key in the long run is the acquistion of MySQL database, which currently disrupts the expensive Oracle database software. I am a bit concerned as a MySQL user that Oracle would neglect or kill MySQL as time goes on. I am certain that the innovation in MySQL will dwindle. Apart from MySQL, Oracle gets Java technology, Solaris OS and of course the hardware.
This deal is also a blow to IBM. This makes Oracle a much bigger threat in IT infrastructure play. Oracle can offer end to end solutions just as IBM can. Did IBM make a mistake in pulling back its offer? Time will tell.