Oracle's Sun buy 'redefines future IT landscape'�
Oracle and Sun have entered into an agreement in which Oracle will acquire Sun common stock for $9.50 per share in cash in a overall transaction valued at around $7.4bn, or $5.6bn net of Sun’s cash assets and debt.
The buy-up comes little more than two weeks after IBM withdrew a reported £7m bid for Sun; with the Oracle coup, the pass-up is now widely seen as a missed opportunity on IBM’s part, even though the company reportedly had a team of 100 lawyers conducting due diligence on the proposed acquisition.
Oracle, however, has had no such reservations: “We estimate that the acquired business will contribute over $1.5bn to Oracle’s non-GAAP operating profit in the first year, increasing to over $2bn in the second year,” says Oracle president Safra Catz. “This would make the Sun acquisition more profitable in per share contribution in the first year than we had planned for [our previous] acquisitions of BEA, PeopleSoft, and Siebel combined.”
The acquisition of Sun “transforms the IT industry”, says Oracle CEO Larry Ellison. “Oracle will be the only company that can engineer an integrated system applications ... where all the pieces fit and work together so customers do not have to do it themselves,” he adds.
When the acquisition is completed it will mean that Oracle now owns two key Sun software assets: Java and Solaris; and Oracle’s Fusion Middleware is built on top of Sun’s Java language and software.
Meanwhile, the Sun Solaris operating system is the principle platform for the Oracle database, the database giant says, and with the Sun acquisition, Oracle intends to optimise the Oracle database for some of Solaris’s high-end features.
“We are entering a market context where the term ‘big four’ will equate to IBM, HP, Microsoft, and Oracle,” comments David Mitchell, SVP IT research at market watcher Ovum. “These suppliers will, between them, define a significant proportion of the IT market landscape for the next 10 years.”
Other vendors in the IT market need to consider the traditional advice of “get big or get niche”, Mitchell adds: “There is limited potential remaining in the market for another, player to acquire the scale that would take them into the ‘big four’ league – so the majority of suppliers should ensure that they have highly competitive but specialist offerings, rather than playing to scale card.”