Oracle buys Sun Microsystems for $7.4B. "ORACLE JAVA" How does it sound ?

Oracle Corp. snapped up computer server and software maker Sun Microsystems Inc. for $7.4 billion Monday, trumping rival IBM Corp.'s attempt to buy one of Silicon Valley's best known — and most troubled — companies.

The deal would end Sun's 27-year history as Silicon Valley's brash independent and shake up the computing industry. It comes after a monthlong drama that entered its final chapter last week.

IBM had retracted an earlier buyout offer for Sun after the two sides couldn't agree on key details. Last Thursday, Sun reached out to longtime business ally Oracle to make a bid, two people familiar with the discussions told The Associated Press. These people spoke on condition of anonymity because the details of the talks were considered confidential.

Once Oracle entered the fray, Sun tried to turn up the heat on IBM, which resubmitted its previous offer, only to be outdone by Oracle's latest power play. Now Oracle, traditionally a business software maker, will be the company that tries to use Sun's assets to build a more comprehensive one-stop technology shop.

"With the acquisition of Sun, Oracle is now able to make all of the pieces of the technology stack fit together and work well," Oracle Chief Executive Larry Ellison said during a Monday conference call.

The deal would give Oracle ownership of the Java programming language, which runs on more than 1 billion devices around the world. Oracle also would take charge of the Solaris operating system, which already has been a platform for much of Oracle's products.

It's far from Oracle's biggest acquisition during a four-year shopping spree that has cost more than $40 billion, but it may be the boldest. Oracle, a Redwood Shores, Calif.-based business software maker, will be branching more into data storage and computer hardware.

Jonathan Schwartz, Sun's CEO, predicted the combination will create a "systems and software powerhouse" that "redefines the industry, redrawing the boundaries that have frustrated the industry's ability to solve." Among other things, he predicted Oracle will be able to offer its customers simpler computing solutions at less expensive prices by drawing upon Sun's technology.

Oracle will pay $9.50 in cash for each Sun share. The price represents a 42 percent premium to Sun's closing stock price of $6.69 on Friday, and is about twice what Sun was trading for in March, before word leaked that IBM and Sun were in buyout negotiations. Net of Sun's cash and debt, the transaction is valued at $5.6 billion, Oracle said.

IBM had offered to buy Sun for $9.40 per share, but acquisition talks fell apart this month in a disagreement over price and the extent to which IBM was willing to see the deal through an antitrust review.

Shares of Sun jumped $2.46, or 37 percent, to $9.15 in Monday afternoon trading while Oracle shares shed 42 cents, or 2.2 percent, to $18.64. IBM shares fell 85 cents to $100.43.

Some of Oracle's earlier acquisitions have resulted in a significant number of layoffs. In Monday's conference call, Oracle didn't discuss how the deal would affect jobs. Oracle employs about 86,000 people worldwide while Sun has about 33,000 workers.

Sun, which invented the Java programming language used to develop applications for Web sites, mobile phones and even DVD players, had been reluctant to sacrifice its independence, even as it reported big losses. Despite billions in sales — $13.3 billion over the last four quarters — the company has not been able to turn a consistent profit, losing $1.9 billion in the same period.

Yet Oracle says it can run Sun more efficiently. It expects the purchase to add at least 15 cents per share to its adjusted earnings in the first year after the deal closes. The company estimated Santa Clara, Calif.-based Sun will contribute more than $1.5 billion to Oracle's adjusted profit in the first year and more than $2 billion in the second year.

If Oracle can hit those targets, Sun would yield more profit than the combined contributions of three other major acquisitions — PeopleSoft Inc., Siebel Systems Inc. and BEA Systems — that cost Oracle a total of more than $25 billion.

A deal with Oracle might not be plagued by the same antitrust issues that could have loomed over IBM and Sun, since there is significantly less overlap between the two companies. Still, Oracle could be able to use Sun's products to enhance its own software.

Oracle's main business is database software. Sun's Solaris operating system is a leading platform for that software. The company also makes "middleware," which allows business computing applications to work together. Oracle's middleware is built on Sun's Java language and software.

Calling Java the "single most important software asset we have ever acquired," Ellison predicted it would eventually help make Oracle's middleware products generate as much revenue as its database line does.

Sun's takeover is a reminder that a few missteps and bad timing can cause a star to come crashing down.

Sun was founded in 1982 by men who would become legendary Silicon Valley figures: Andy Bechtolsheim, a graduate student whose computer "workstation" for the Stanford University Network (SUN) led to the company's first product; Bill Joy, whose work formed the basis for Sun's computer operating system; and Stanford MBAs Vinod Khosla and Scott McNealy.

Sun was a pioneer in the concept of networked computing, the idea that computers could do more when lots of them were linked together. Sun's computers took off at universities and in the government, and became part of the backbone of the early Internet. Then the 1990s boom made Sun a star. It claimed to put "the dot in dot-com," considered buying a struggling Apple Computer Inc. and saw its market value peak around $200 billion.

But Sun was slow to react when the bottom fell out in 2001. Its high-end products, built on Sun's proprietary systems and its own microprocessors, suffered against less-expensive rivals that used industry-standard technologies such as chips from Intel Corp. and Advanced Micro Devices Inc. and software from Microsoft. Sun lost more than $5 billion in the first five years after the bubble burst.

Oracle-Sun deal wouldn't change much for consumers (AP)

Oracle Corp.'s $7.4 billion acquisition of Sun Microsystems Inc. would have minimal impact on technologies that most consumers notice.

Oracle supplies databases and other software to large organizations, while Sun is a major vendor of server computers, data storage machines and business software. Consumers touch those technologies in indirect ways, such as by calling up a Web site or pulling down payroll information from a corporate database.

Consumers are more likely familiar with Java, a programming language that Sun invented. Software developers use Java to build Web sites and programs for cell phones and other devices. You might notice your computer advising you to download a regular update to keep Java-based programs running smoothly. Those updates, which come from Sun, presumably would now come from Oracle if its deal for Sun is completed this summer as the companies expect.

Sun also has been one of the key promoters of OpenOffice, a free, open-source alternative to Microsoft Corp.'s Office software. Sun founded the OpenOffice.org project in 2000, and has been the primary contributor of new computer code to the software. Oracle could now take on that role as part of its broader efforts to challenge Microsoft.

Sources:

The Associated Press
Yahoo Tech News