Oracle has swept up Sun Microsystems for $7.4 billion, shutting the doors on failed talks between the ailing computer maker and industry rival IBM.
Oracle announced today it has signed a binding agreement to buy out Sun common stock for $9.50 per share, which brings the value of the business to $7.4 billion, or $5.6 billion net of Sun's cash and debt.
“The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems. Oracle will be the only company that can engineer an integrated system - applications to disk - where all the pieces fit and work together so customers do not have to do it themselves. Our customers benefit as their systems integration costs go down, while system performance, reliability and security go up,” says Oracle CEO Larry Ellison.
According to a statement released by Oracle this afternoon, the board of directors of Sun has unanimously approved the transaction. “It is anticipated to close this summer, subject to Sun stockholder approval, certain regulatory approvals and customary closing conditions.”
Troubled days
Sun has been in financial straits for some time and has been open to offers of purchase since the thick of the global economic crisis. IBM has headlined as the top bidder for the business and discussions have been on-and-off for some time.
Discussions came to halt early this month. Reports indicate that Sun was pushing for higher than the $7 billion value, but IBM would not bite and was arguing for a lower purchase price.
The global industry has been watching the negotiations with fascination. Specifically, since IBM is showing stronger results than most businesses during the current economic downturn. Sun, on the other hand, according to its financial statements, has lost nearly $1.9 billion in its last two quarters. Reports indicate that the company has fired 2 800 employees this year alone.
Despite the Sun's financial leakage, Oracle expects the business to become profitable within its stable. According to the company's president, Safra Catz, Oracle believes that Sun will contribute over $1.5 billion to non-GAAP [standard US accounting practice] profit in the first year, booming to $2 billion in the second.
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