Oracle Buying Sun for $7.4 Billion

Hold everything, Oracle has agreed to buy Sun.

At the end of last week, Bloomberg reported that struggling Sun Microsystems had returned to rebuild previously burned bridges with IBM. According to Bloomberg, Sun said it would talk if IBM made a stronger commitment to buy. It reeked of desperation, but then who was going to argue that at this stage in the game Sun wasn’t getting a little bit anxious to sell?

Following the collapse of the IBM deal, the outlook for Sun wasn’t exactly bright. While many felt the $9.50 per share initially offered by IBM was more than Sun was worth, analysts debated as to whether or not a single company would be willing to buy Sun in its entirety and feared that the best option may be for Sun to break into smaller divisions and sell individually.

Early this morning all that changed: Oracle announced that it will buy Sun for a reported $7.4 billion, or $9.50 per share. According to the New York Times, the two companies said in a statement that the value of the transaction would be $5.6 billion net of Sun’s cash and debt. According to Bloomberg, Oracle President Safra Catz has said Sun will contribute an estimated $1.5 billion to the company’s non-GAAP operating profit in the first year, with that figure increasing to over $2 billion by year two.

“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,” Catz continued. Oracle has also dubbed Java “the most important software” it has ever acquired.

Reuters reports that Sun shares this morning jumped 27.1 percent (up to $8.50 from $6.69 on Friday) and Oracle shares fell 4.2 percent (down to $18.25).

Related Links

• The New York Times
  
• Bloomberg
• Reuters