ORACLE BUYS SUN

Oracle agreed to buy Sun Microsystems for about $7.4 billion in cash, swooping in after the server maker's talks to be acquired by IBM failed.

Oracle will pay $9.50 a share, 42 percent more than Sun's closing price Friday. Oracle plans to make Sun a profitable part of its business and said the purchase will add $1.5 billion to operating earnings, excluding some items, in the first year.

The takeover moves Oracle, the world's second-largest software maker, into the market for server and storage computers, pitting the company against IBM and Hewlett-Packard. Oracle chief executive Larry Ellison also gains Sun's Java programming language and Solaris operating system, which work with its top-selling database program.

"They're really going to zero in on just the most strategic part of Sun's hardware business," said Heather Bellini, an analyst at UBS AG in New York, with a "buy" rating for Oracle's shares. "They'll end up making the company much better-run."

Excluding Sun's cash and debt, the deal is valued at $5.6 billion, Oracle said in a statement. Sun had about $2.6 billion in cash and marketable securities, and about $700 million in long-term debt at the end of 2008. Oracle has about $11.3 billion in cash and marketable securities.

Sun, based in Santa Clara, Calif., rose $2.46, or 37 percent, to close at $9.15. Oracle, based in Redwood City, Calif., dropped 24 cents, to $18.82.

Sun's Java technology lets developers write programs that work across operating systems and on a variety of devices. The software has been installed on 800 million desktop computers and also powers 2.1 billion mobile devices.

Sun's Solaris competes with Linux and Microsoft's Windows software. While Sun offers versions of Solaris and its MySQL database program free to developers, the company makes money by selling service, support and software updates. Sun boosted software sales by 21 percent in the quarter through Dec. 28 and said in January that it projects revenue from those products to reach more than $600 million a year.

Oracle had sales of $22.6 billion in the latest fiscal year.

Oracle President Safra Catz said the company plans to operate Sun at "substantially higher margins." She declined to provide specifics.


Source: The Washington Post

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IBM Reportedly will Buy Sun for $7 Billion

I.B.M. appears on the verge of acquiring Sun Microsystems, a longtime rival in the computer server and software markets, for nearly $7 billion.

The two companies have been negotiating for weeks, ironing out terms of an agreement that would turn I.B.M. into the dominant supplier of high-profit Unix servers and related technology.

I.B.M. is offering $9.50 a share, down from a bid of $10 a share, said people familiar with the discussions who were not authorized to speak publicly. The new agreement would restrict I.B.M.’s ability to walk away from the deal, these people said.

Even at $9.50 a share, the deal would value Sun, based in Santa Clara, Calif., at close to $7 billion. It is close to a 100 percent premium based on Sun’s value before rumors of an acquisition spread last month.

Representatives of I.B.M. and Sun declined to comment. People familiar with the negotiations say a final agreement could be announced Friday, although it is more likely to be made public next week. I.B.M.’s board has already approved the deal, they said.

I.B.M., based in Armonk, N.Y., has spent weeks poring over Sun’s patents and licensing agreements. Some 100 lawyers have been working in a hotel in Silicon Valley on intellectual property matters.

Although in a slump of nearly a decade, Sun is one of the largest sellers of server computers and is known for systems based on its Sparc chips. It has a vast software portfolio, including the Solaris operating system , the open-source MySQL database and the Java programming language.

“Sun has obviously been a lost child for many years, but they have some great assets,” said Rebecca Runkle, director of technology research at Research Edge, an equities analysis business. She said that Sun and I.B.M.’s cultures would mesh in their commitment to large research and development projects.

Sun’s software assets would fit into I.B.M.’s long-term strategy of chasing higher-profit software and services sales. It could also give I.B.M. more strength in competing against Oracle, which has sold its database software on top of Sun systems for years.

I.B.M.’s acquisition of Sun would disrupt that long partnership with Oracle. I.B.M. could also undercut Oracle by more actively promoting the free MySQL software, which has become the most popular database software with Internet companies.

Hardware inherited from Sun could present antitrust concerns. I.B.M. faces an antitrust complaint from T3 Technologies over its dominance in the mainframe market. By buying Sun, I.B.M. would gain close to total control over robotic tape storage devices used to file data on mainframes.

Sun has a sales and technology partnership with Fujitsu for the sale of Unix servers. If I.B.M. buys Sun, Fujitsu and Hewlett-Packard will be the combined company’s only major competitors in the Unix market, a possible concern for regulators here and in Europe. Sun faces a patent infringement lawsuit from the storage maker NetApp and has countersued. NetApp has a sales pact with I.B.M.

Silicon Valley executives, including Paul S. Otellini, chief of Intel, have said that Sun has spent months seeking a suitor.

Shares of I.B.M. rose more than 3 percent on Thursday, to $100.82, and Sun’s shares rose more than 2 percent, to $8.21.


Source : The New York Times