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After IBM dalliance, Sun goes to Oracle for $7.4b
(Agencies)
Updated: 2009-04-21 11:49

SAN FRANCISCO - Sun Microsystems Inc.'s scramble to find a suitor landed the slumping server and software maker in the arms of Oracle Corp., which agreed to pay $7.4 billion in cash for Sun in a startling marriage that would transform Silicon Valley and the computing industry.

After IBM dalliance, Sun goes to Oracle for $7.4b
Oracle CEO Larry Ellison delivers his keynote address at Oracle OpenWorld in San Francisco, California in this September 24, 2008 file photo. Oracle CEO Larry Ellison delivers his keynote address at Oracle OpenWorld in San Francisco, California in this September 24, 2008 file photo. [Agencies]
The acquisition announced Monday illustrates how some of the biggest and richest technology companies are racing to become one-stop shops for corporate and government customers. By picking up Sun and expanding heavily into hardware, Oracle would look much more like the company it beat out for Sun — IBM Corp., which appears unlikely to re-enter the bidding.

Heavyweights like IBM, Hewlett-Packard Co., Cisco Systems Inc. and now Oracle all want to offer a richer mix of technology products. The companies hope to find more hooks into customers and use those relationships to sell other kinds of stuff.

That setup, with a broad mix of services, software and hardware, helped Armonk, N.Y.-based IBM escape financial ruin in the 1990s and become one of the industry's most profitable companies. IBM has forked out nearly $13 billion on 40 acquisitions since 2006 to expand its offerings. HP has followed suit, spending $13.9 billion for services provider Electronic Data Systems last year.

Santa Clara, Calif.-based Sun lacked that kind of scale, especially after the tech meltdown of 2001 knocked the company off balance and led to a decade of financial pummeling.

Sun's best sellers are computer servers and machines that store data on tape. But Oracle and IBM mainly had their eyes on Sun's software.

The deal would give Oracle ownership of the Java programming language, which is a key element of the Internet and runs on more than 1 billion mobile devices worldwide. Oracle would get the Solaris operating system, which already has been a platform for Oracle's products. And Oracle would get Sun's MySQL database software, which has undercut Oracle and siphoned some sales away.

All these products are open-source, which means their underlying code is distributed freely on the Internet. To make money from the software, Sun sells support contracts alongside those programs. Like IBM before it, Oracle believes it can make money off those properties better than Sun can, partly by selling other products in package deals.

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