Oracle Corp. (ORCL) will buy Sun Microsystems Inc. (JAVA) for
$7.4 billion, calling Sun's Java "the most important software" it
has ever acquired.
Earlier this month, Sun's talks to sell itself to International
Business Machines Corp. (IBM) unraveled, raising new questions
about the prospects for the company and Chief Executive Jonathan
Schwartz, who has been under pressure to come up with an
alternative for the struggling computer maker.
The Silicon Valley icon has seen slumping sales of its servers
and posted losses in three of its last four quarters.
The deal values Sun at $9.50 a share, a 42% premium to Friday's
close. Sun's shares were recently up 27% at $8.50 while Oracle fell
4.5% to $18.20.
Oracle expects the acquisition to add $1.5 billion to operating
profit in the first year and more than $2 billion in the second
year. President Safra Catz said that would make the Sun deal more
profitable in per-share contribution in the first year than its
recent acquisitions of PeopleSoft, Siebel and BEA combined.
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.
Sun's board unanimously approved the deal, which is valued at
$5.6 billion net of the company's cash and debt and is expected to
close this summer.
Schwartz's status was described by some as precarious if he
couldn't complete a sale of Sun. Schwartz, who took over as CEO in
2006, has made some progress in shifting Sun's focus toward
software, but the company still gets a big chunk of its revenue
from the line of servers that has faced slowing sales recently.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com