M&A News: Oracle buys Sun

IBM and Oracle have been locked in battle over the large database market for years. A decade ago, each had around a third of the market, with the rest made up of dozens of also-rans.

Best of the rest was Sun. And then Sun bought MySQL giving it a massive slice of the internet database market - and an increasing share of large corporations' back office.

IBM has been struggling: in 2001 it paid USD1,000 million for Informix and their 100,000 users. But in 2007, CBR reported a conversation with a IBM spokesman saying that Informix had, by that time, 20,000 users.

Microsoft has been playing a role in the market, choosing to cosy up to IBM to announce standards whilst still aiming to increase its own market share in the large database market.

The success of the businesses has, largely, been defined by the success of their customers. Few industries name-drop as much as the large database market.

PeopleSoft were reported, in 2005, with regard to their "embrace of IBM's technology product lines - WebSphere and DB2." But later in 2005, Oracle bought PeopleSoft. The company, and its subsidiaries, were IBM hardware customers - but used Oracle software.

But here's one reason that Larry Ellison - one of the few technocrats not to have been booted out of the company he founded - wants Sun. Sun owns Java, and several of IBM's database products are dependent on Java. Sun's case is that commercial developers who integrate Java must have a licence - similar to the MySQL position. So, Oracle may simply decide to dicate terms on how IBM uses Java. However, IBM's Eclipse has made inroads into Java in the large applications market.

"The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems," said Oracle CEO Larry Ellison today. "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. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up."

And then he said that owning Java and Solaris (Sun's large operating system that is partly UNIX based but has been losing ground to Linux in the mid-range sector due to quirkiness that users decide they don't need) are important.

In fact, an Oracle statement today says "Java is one of the computer industry's best-known brands and most widely deployed technologies, and it is the most important software Oracle has ever acquired."

But Oracle see another major synergy: "The Sun Solaris operating system is the leading platform for the Oracle database, Oracle's largest business, and has been for a long time. With the acquisition of Sun, Oracle can optimize the Oracle database for some of the unique, high-end features of Solaris."

So what of MySQL and OpenOffice.Org - both Sun projects? Not a lot was said but what little was said is important: "Oracle is as committed as ever to Linux and other open platforms and will continue to support and enhance our strong industry partnerships."

Oracle is aiming at securing a vertical market - at least so far as software is concerned: "Sun is a pioneer in enterprise computing, and this combination recognizes the innovation and customer success the company has achieved. Our largest customers have been asking us to step up to a broader role to reduce complexity, risk and cost by delivering a highly optimized stack based on standards," said Oracle President Charles Phillips.

And just in case that attracts the attention of competition authorities, he went on:"This transaction will preserve and enhance investments made by our customers, while we continue to work with our partners to provide customers with choice."

Oracle will acquire Sun common stock for USD9.50 per share in cash. The transaction is valued at approximately USD7.4 milliard, or USD5.6 milliard net of Sun's cash and debt, said Oracle