Sun Sets for $7.4 Billion

I'm starting to think that Oracle (Nasdaq: ORCL  ) Chief Executive Larry Ellison just likes to play spoiler. Earlier today, his company announced a $7.4 billion, or $9.50 per share, deal for Sun Microsystems (Nasdaq: JAVA  ) , ending rumors of a proposed acquisition by IBM (NYSE: IBM  ) .

Sun, as we know it, ends too.

"We're thrilled to be acquired by Oracle," Sun Co-Founder and Chairman Scott McNealy said during a conference call with analysts. But his heart didn't seem in it. As enthused as Ellison sounded, McNealy sounded deflated. Beaten.

And why wouldn't he? After decades of fighting the good fight, Sun has teetered toward irrelevance, replaced by bigger and better-capitalized competitors in the server wars: Dell (Nasdaq: DELL  ) , Hewlett-Packard (NYSE: HPQ  ) , and IBM, notably.

Ellison, meanwhile, has good reasons to be enthusiastic, stealing Sun from IBM just as he stole Retek from SAP (NYSE: SAP  ) a few years ago. Yet this deal promises a bigger windfall: Oracle expects Sun to contribute $1.5 billion in non-GAAP operating profit and $0.15 in per-share non-GAAP earnings in the first year after the deal closes.

Oracle also acquires rights to the Java language and platform and the Solaris operating system, protecting important turf that would have been at risk had Big Blue come away with the prize. More Oracle databases run on Sun's hardware with Solaris than any other platform, Ellison said during the call.

Trouble is, he didn't say much more. Platitudes followed facts in hopeful boasting about the strength of the combined company. No word of how Oracle plans to integrate a massive hardware business into its mostly software empire. (Oracle also sells a database appliance in tandem with HP.)

What we heard instead -- this time, from company President Charles Phillips -- were ideas for how the company could create "applications-to-disk" stacks of technology for solving business problems. It's a good story, and supported, Phillips said, by meetings with chief information officers who told Oracle that they wanted vendors to consolidate components into whole systems.

Seems fair. For now, though, we're forced to take this and Oracle's other conclusions at face value. Neither Oracle nor Sun allowed questions during the conference call.

Maybe that's as it should be. Ellison may love this deal, but McNealy -- rightfully, I think -- sounded sad and perhaps even a little embittered that has it come to this. Getting him off the phone quickly was the right PR move.

Or maybe it wasn't; I'm only commenting on what I heard. To me, McNealy's tone was that of a combative man who'd seen better days. (He has.) So if he is embittered, can you really blame him?

Sun has set on Silicon Valley, and the Valley is worse off for it.

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Fool contributor Tim Beyers owned shares of Oracle and IBM at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is an acquired taste for those accustomed to the Street.


Read/Post Comments (4) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 20, 2009, at 4:45 PM, Ruhaan wrote:

    Well Sun has been loosing market share for a very long time. There acquisition in the storage market did not give them a leg up either. Infact, Sun, despite a very strong stable of products and engineering, has always been very poor in being able to market itself. If Scott is sad, so be it. This is how Capitalism is supposed to work. I am quite certain, Oracle, will be able to add a lot of value with this acquisition as they have proven historically. The race is really between Oracle and IBM now. I can already see how they will position themselves and benefit.

    This is great for Oracle.

    Full Disclosure: Dont own any of the shares mentioned in my comment. Though I work with all of these technologies..

  • Report this Comment On April 20, 2009, at 5:07 PM, jbromet wrote:

    After years of treating its customers like untouchables with a "we'll get back with you whenever we darn well feel like it", Oracle can now add that bit of culture to Sun Microsystem. Whatever the net benefits there are to the industry, as usual, the customers always will the short straw. The giants get to call the shots. Being treated as a valued customer is not in the Oracle playbook.

  • Report this Comment On April 21, 2009, at 8:01 AM, AGCAPS wrote:

    I read this article plus comments and I am not see any value on it.

    I conclude that:

    If you want to get a billion it is better to have two or three billions.

    Have some lucky

    Own a great company and most important have the right product to sale, make it public and profit from it.

    If you do not have money; be friend of a millionaire or billionaire

    Do not waste your time try to figure-out the EP Cash flow and other things; you will never get there.

    Wan the lottery.

    Leave poor.

    Write a book about anything controversial.

    Be a football player

    Be a star.

    Be a TV commentator.

    Be a lawyer

    Be a politician

  • Report this Comment On April 21, 2009, at 2:17 PM, chuckbreaux wrote:

    AGCAPS:

    Dude, I don't think you & I read the same article.

    Chuck

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