Oracle's Acquisition of Sun Microsystems

Background Information:

Oracle Corporation (NASDAQ: ORCL), a database and software giant, completed its acquisition of Sun Microsystems, Inc. (NASDAQ: JAVA), a provider of network computing infrastructure solutions, on January 26, 2010. The deal is valued at approximately $7.4 billion ($9.50 per share in cash), representing a 42% premium to the closing price of Sun Microsystems common stock on April 17, 2009 (when the deal was initially announced). Not only does the integration of Sun Microsystems present opportunities for cost synergies in areas such as G&A and cross selling, but it also offers the potential to realize supply chain and product strategy efficiencies.

In a press release dated April 2009, Oracle’s CEO Larry Elison explains the perceived benefits of integration; “Oracle will be the only company that can engineer an integrated system - applications to disk - where all pieces fit and work together so customers do not have to do it themselves…customers benefit as their systems integration costs go down while system performance, reliability and security go up.” In technology, as in many product categories, where customers put their offerings together by acquiring products and services from different providers, the chain can break down. An innovative/strategic merger can eliminate annoyances and poor interfaces all while providing incredible advantages, based on the customers' desire for that unique solution.

Sun’s New Focus:

As discussed in an article published by eWeek dated December 18, 2009, the future focus of Sun Microsystems under the Oracle platform will not be to compete “in the high-volume, low-margin server market, but will cede that space to Hewlett-Packard and Dell. Instead, the software giant will focus Sun’s SPARC/Solaris and Intel-based systems on the high-end server market and as the basis for Oracle’s converged data centre strategy.” Due to the complementarities between Oracle’s database/enterprise software expertise and...