Oracle to acquire Sun for $5.6 billion

Oracle Corporation said Monday it has entered into a definitive agreement to acquire Sun Microsystems in a cash deal valued at $5.6 billion, paving the way for the enterprise software maker to deliver the industry's first fully integrated suite of hardware and software systems for some of the world's largest data centers.

The total transaction, valued at approximately $7.4 billion or $9.50 per share net of Sun’s cash and debt, comes just weeks after Sun was reported to have turned down a bid of $9.40 per share from IBM, which subsequently withdrew its offer after Sun canceled its exclusive negotiating rights.

Oracle said it expects the acquisition to add at least 15 cents on a non-GAAP profit to its adjusted earnings in the first full year after the deal closes. It also estimates that Sun will contribute over $1.5 billion to its 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.

Oracle picks up two key Sun software assets — Java and Solaris — in the deal that will allow it to deliver a full suite of hardware and software systems unparalleled in the industry.

Oracle Fusion Middleware, the software maker's fastest growing business, is built on top of Sun’s Java language and software, meaning Oracle can now ensure continued innovation and investment in Java technology for the benefit of its customers. Meanwhile, the Solaris operating system is the leading platform for the Oracle database, Oracle’s largest business. With Solaris now part of its product portfolio, Oracle plans optimize the Oracle database for some of the operating system's unique, high-end features.

"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 chief executive Larry Ellison. "Our customers benefit as their systems integration costs go down while system performance, reliability and security go up."

More specifically, Oracle will be free to more closely tie its software to Sun servers running Solaris, which power some of the most critical data centers in government and on Wall Street.

Sun's Board of Directors has unanimously approved the transaction. It is anticipated to close this summer, subject to Sun stockholder approval, certain regulatory approvals and customary closing conditions.