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Oracle snatches Sun away from IBM

by Scott Bicheno on 20 April 2009, 16:00

Tags: IBM (NYSE:IBM), Sun Microsystems, Oracle (NASDAQ:ORCL)

Quick Link: HEXUS.net/qarwz

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Swooping for Sun

What looked set to be a ‘will they won't they' saga, akin to Microsoft's courtship of Yahoo! last year, has ended abruptly as enterprise software giant Oracle has had a $9.50 per share ($7.4 billion) cash offer for server company Sun Microsystems unanimously approved by the Sun board.

A few weeks ago the front runner to acquire Sun was IBM, but after looking into Sun's business a bit more closely, it reportedly lowered its offer to $9.40 per share and negotiations subsequently broke down. Given the tiny difference between the prices, you have to wonder if IBM was just spoiling with its bid.

"We expect this acquisition to be accretive to Oracle's earnings by at least 15 cents on a non-GAAP basis in the first full year after closing. We estimate that the acquired business will contribute over $1.5 billion to Oracle's 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.

"The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems," said Oracle CEO Larry Ellison. "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. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up."