Oracle Sun Acquisition Reconfigures OS Market

Goodbye IBM, hello Oracle

It’s a fact of corporate life these days. Companies are laying off significant numbers of employees, some are going bankrupt and others are bought out by others in their field. This is particularly true of tech companies, where corporate mergers of the larger consuming the smaller happens fairly often. Unfortunately, with companies in the same field, the purchaser often already has staff to handle many of the positions in the smaller, subsumed company. That means – you guessed it – more layoffs.

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First it seemed that IBM would buy Sun Microsystems, then they backed out once price talks broke down. Sun’s shares gained 80 percent the day the potential IBM buy was announced, but then they fell 25 percent after the negotiations ended.

Should we expect that in the Oracle Sun merger? Oracle has made the move to seal the deal.

Got Java

Julie Alnwick reports for Bloomberg that Oracle Corp. has indeed made an agreement to purchase Sun Microsystems Inc. for nearly $7.4 billion in cash. Per-share price for Sun quickly rose to $9.50, 42 percent more than Sun’s closing the previous day. An Oracle press release predicts that Oracle’s acquisition will add $1.5 billion in operating profit within the first year.

In addition to the profit windfall, this brings Sun’s Java technology and Solaris OS into the Oracle fold. Oracle is the world’s second-largest software producer, spending nearly $34.5 billion since 2005. IBM ranks behind Oracle and Microsoft in software sales.

Solaris rising

As a result of the move, Sun stocks increased. However, despite the promise of added operating profit, Oracle dropped 91 cents per share to $18.15. They had closed the previous week at $19.06 per share. However, if things go as planned, that should be only a temporary hiccup.

Sun’s Solaris operating system is vying for market share with Microsoft Windows, Apple’s UNIX-based OS and Linux. Despite feeling the sting of the recession, Sun managed to boost sales of their software by 21 percent last quarter. A January 2009 estimate projected their annual software profit at $600 million. By contrast, Oracle projects sales of their own software to reach $17.8 billion in this fiscal year.

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