Sun Rises Again on News of Oracle Takeover

Software maker Oracle Corp. (ORCL) will buy Sun Microsystems Inc. (JAVA) for market value of $7.4 billion, or $9.50 in cash per Sun share, according to a deal announced Monday.

Sun’s stocks had soared more than 35 percent by 10:50 a.m. Eastern. Oracle’s shares, on the other hand, were down about 4 percent.

The Oracle-Sun move comes just weeks after acquisition talks between IBM Corp. and the financially struggling Sun broke down. The dollar amount also represents a 42 percent premium over Sun’s closing stock price on Friday. Minus Sun’s cash and debt, Oracle said the deal actually is worth around $5.6 billion.

The thinking is that Sun’s Solaris and Java systems will fill a critical gap in Oracle’s middleware business, creating a complete product set for Oracle’s corporate customers.

Oracle has spent more than $34 billion on acquisitions since 2005 but this latest transaction is its most meaningful, executives said.

“Java is the single most important software we’ve ever acquired,” said Oracle CEO Larry Ellison in a conference call on Monday.

Analysts seemed to agree.

“Control of Java, the core of Oracle’s software products and also for many of Oracle’s competitors, is a real coup for Oracle and Larry Ellison,” said Jack Gold of J. Gold Associates. ”This can’t make IBM very happy as it has also built its key business software offerings around Java.”

Gold also expects Oracle and Sun to integrate better than IBM and Sun would have.

“The Silicon Valley philosophy of [Sun’s Scott] McNealy and Ellison are more closely aligned than those of McNealy and the IBM juggernaut, so this may be a better fit overall,” he added.

Overall, Oracle took advantage of a prime opportunity, Gold noted. But both companies win in the deal because Sun “would have floundered without a rescue.” End users might pay higher prices for Oracle software, and have fewer choices for such systems, yet an Oracle-Sun combination remains a solid pairing.

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