Disruption in the Tech Sector: Oracle to Acquire Sun for $7.4 billion
Oracle announced it will acquire Sun, a rival IT firm, for $9.50 per share, or ca. $7.4 billion, or $5.6 billion net of Sun’s cash and debt. The announcement comes two weeks after IBM ended talks to acquire Sun.
In acquiring Sun, Oracle is upending the IT industry. Oracle has long-standing partnerships with Sun competitors HP and Dell, as well as with Sun, to provide servers on which to run Oracle databases. The move puts Oracle into the hardware business, putting the company in even more direct competition with IBM, which sells its own servers in conjunction with its database tools and applications, as well as with HP and Dell.
In making the announcement, Oracle CEO Larry Ellison reminded IBM that Oracle will be “the only company that can engineer an integrated system – from applications to disk…” IBM sold its disk drive business to Hitachi in 2002.
Oracle will gain ownership of two key Sun software assets: Java and Solaris. The former, given’s Sun’s use of Java for its Fusion Middleware business, may very well be Oracle’s most significant software acquisition the company has made (in recent years, Oracle has acquired BEA, PeopleSoft, and Siebel). Sun clearly didn’t want these assets to fall into the hands of a competitor. Oracle will also be able to optimize the Oracle database to leverage unique features of the Solaris operating system, although the company took pains to state that it is “as committed as ever” to Linux and other open platforms.
While Sun might have represented a difficult entity for IBM to swallow whole, given the vast differences in corporate culture, the Oracle-Sun combination may be somewhat smoother. Scott McNealy, Sun’s co-founder and chairman, and Ellison have been close allies and both have engaged in repeated Microsoft baiting over the years.
Sun is promising that the acquisition will add $1.5 billion in operating profit in the first year (the acquisition is expected to close this summer). Very few acquisitions work as advertised (think Time Warner and AOL) and Sun lost almost $2 billion in the last two quarters. Most customers of both companies, however, will likely cheer as the acquisition removes much (but not all) of the uncertainty in terms of product direction and support.
Jonathan B. Spira is the CEO and Chief Analyst at Basex.
April 20th, 2009 09:40
I can only hope that Ellison & Co. have read up on why mergers fail (you cite an excellent model, TW and AOL). Yes, Oracle has integrated BEA, PeopleSoft, and Siebel but those had to have been walks in the park compared to the challenges that integrating Sun will pose. Good first look at the situation!
April 21st, 2009 12:08
Some quick observations about the fate of MySQL and about Oracle’s and Sun’s game here. There’s a reminder about the history of the BLIT terminal and reminder about why a free software movement exists.
1. Re MySQL:
Don’t forget that some years ago Oracle acquired Sleepycat software who wrote and distributed the free software “Berkeley DB” and “Berkeley B/XML” databases. Oracle now develops and distributes these (quite fine) free
software programs and appears to behave honorably with respect to them.
2. Re WTFubar is Oracle doing?:
Oracle just became IBM. Sun has mad skills and manufacturing capacity in network attached storage and in containerized data centers, along with their more traditional server products. Sun, of course, has a heavy hand in the Java world (as does IBM). Oracle is now, like IBM, to be a “full spectrum” solutions provider.
3. [Spira] “Does Oracle envision a world of Oracle hardware [such as their NIC thin-client experiment] running Oracle software?”
Sort of, yes. The vision is as old as time-sharing when AT&T envisioned running the world’s computers and leasing everyone BLIT terminals. The vision has evolved so that instead of terminals from a single supplier there is to be a competitive market of closed devices (e.g., iPhone, Kindle, trending towards both ever more “general purpose” and ever more “special purpose” – but always “closed”).
4. Is there a freedom issue here?
You bet! Collusion among firms to promote closed devices over personal computers and centralized services over user-controlled services creates, as
we can clearly see today, innumerable privacy problems and takes the freedom to control one’s computing tools out of the hands of users.
It was *precisely* in response to such threats that the free software movement was created.
The movement is these days working on how to respond to the modern situation in these industries and so we have efforts like http://autonomo.us and my own humble new effort http://basiscraft.com