Update: Oracle buying Sun in $7.4B deal

Computerworld - Oracle Corp. plans to acquire Sun Microsystems Inc. for $7.4 billion, picking up what might prove to be a software treasure trove that includes the popular MySQL open-source database as well as Java.

Oracle said it will pay $9.50 per share in cash for Sun, or $5.6 billion net of Sun's cash and debt. The move follows Oracle's purchases of a raft of companies in the past few years, including Siebel Systems, PeopleSoft and BEA Systems.

Sun shares rose by $2.41 to $9.10 in trading about an hour after the market opened, while Oracle shares declined by $1.03 to $18.03. Shares of the buying company in big mergers and acquisitions often sink at first as investors debate the relative merits of laying out large amounts of cash for the acquisition.

On a conference call Monday, Oracle CEO Larry Ellison said Java and Solaris were the two main reasons Oracle purchased Sun, a move that is in line with Oracle's acquisition strategy to buy companies with "market-leading products."

Calling Java "the single most important software asset we have ever acquired," he said Oracle's Java-based middleware business, bolstered first by the BEA acquisition and now by the purchase of Sun, is on track to become as large as Oracle's flagship database business. Oracle's Fusion middleware is based on Java.

Oracle also considers Solaris "by far the best Unix technology available in the market," which is why more Oracle databases run on that OS than any other, Ellison said. He said Oracle's enterprise customers running both products will be able to experience new benefits by technical integration of the products.

"We will be able to tightly integrate the Oracle database to some of the unique high-end features of Solaris, engineering them to work together and for the first time to deliver complete, integrated computer systems -- database to disk -- optimized for high performance, improved reliability, enhanced security, easier management and a lower total cost of ownership," Ellison said.

Earlier, in a statement, Ellison had indicated that Sun's hardware products were important.

Sun Chairman Scott McNealy, who has shared a stage with Ellison on numerous occasions in the companies' more than 20-year partnership, said Sun and Oracle share many common interests that will make the union a symbiotic one for customers.

"From day one Sun has believed in openness and innovation," he said. "We both believe in the value of R&D, openness, standards, community [and] delivering a complete solution. ... Today marks the next big step in that effort."

Despite his optimism, however, the deal is undoubtedly a personal blow for McNealy, who came up alongside Ellison as a maverick of the technology industry. For years, the two led their companies as the more outspoken of Silicon Valley's executives, shooting barbs at their common enemy Microsoft and even at each other from time to time. Giving up a company he co-founded to Ellison could not have been an easy decision for McNealy.