Sun Microsystems (JAVA)

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Oracle to buy Sun Microsystems for $7.4 billion

By Christopher Hinton, MarketWatch
Last update: 8:10 a.m. EDT April 20, 2009

NEW YORK (MarketWatch) -- Oracle Corp. said Monday if will buy Sun Microsystems Inc. for $7.4 billion in an all-cash deal, or $5.6 billion after including debt.

The $9.50-a-share buyout agreement equates to a 42% premium over Sun's Friday closing price.

Redwood Shores, Calif.-based Oracle (ORCL) said the transaction will contribute to earnings in the first year, adding at least 15 cents a share to its bottom line. It's expected to close this summer, subject to Sun shareholder and certain regulatory approvals.

"The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems," said Oracle Chief Executive Larry Ellison, continuing his program of engineering high-profile acquisitions for the database software company.

Sun (JAVA) is a Santa Clara, Calif., network-computing infrastructure company, best known for its Java operating system. International Business Machines Corp. (IBM) had reportedly been interested in acquiring Sun before the companies parted ways recently. "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," Ellison said in a statement.

Shares of Sun shot up 27% in premarket trading to $8.50, while shares of Oracle slipped 5.3% to $18.05. "We estimate that the acquired business will contribute over $1.5 billion to Oracle's non-GAAP operating profit in the first year, increasing to over $2 billion in the second year," said Safra Catz, Oracle's president, adding: "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."