Oracle to buy Sun Microsystems for $7.4bn

Oracle sees Sun in new light

Software giant Oracle is to buy server and software vendor Sun Microsystems, in a transaction valued at $7.4bn (£5bn).

Oracle chief executive Larry Ellison said: "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."

Oracle president Safra Catz said the deal will have significant financial benefits, offering a more profitable per share contribution in the first year than the previous acquisitions of BEA, PeopleSoft and Siebel combined.

Oracle is touting Java and Solaris as key long-term strategic advantages for the acquisition, although some industry experts have a more cynical reason for the deal - buying out a potential thorn-in-the-side to Oracle in Sun-owned open source database MySQL.

“This is a fantastic day for Sun’s customers, developers, partners and employees across the globe, joining forces with the global leader in enterprise software to drive innovation and value across every aspect of the technology marketplace,” said Sun chief executive Jonathan Schwartz.

Sun chairman and co-founder Scott McNealy added: “Oracle and Sun have been industry pioneers and close partners for more than 20 years. This combination is a natural evolution of our relationship and will be an industry-defining event.”

Initial industry reaction to the deal was mixed, as its implications sink in.

Quocirca analyst Clive Longbottom said the acquisition preserves the large Oracle installed base running on Sun's Solaris operating system, and gains Java - but may alienate HP, another close partner of Oracle.

Consultant Peter Thomas pointed to the potential mismatches in the two firms' product ranges: "It's like Arsenal buying Wasps to catch up with the NY Yankees. "

Neil Ward-Dutton of analyst MWD Advisors said the news is great for Sun but promises interesting times for Oracle partners. With Oracle's talk of delivering an integrated system, "perhaps Sun is Oracle's cloud strategy," he said.

IBM had been in the running to buy Sun, but reportedly pulled out of talks after failing to agree a price.