Oracle buys Sun for just $5.6 billion

Oracle CEO Larry Ellison has had plenty of time to prepare his remarks, but he settled for: "The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems." Then he added: "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." They're moot points: given the scale of global partnerships, many of the majors could make similar claims. Strictly speaking, he's right – but does it matter? "We expect this acquisition to be accretive to Oracle's earnings by at least 15 cents on a non-GAAP basis in the first full year after closing," says Oracle president Safra Catz. "We estimate that the acquired business will contribute over $1.5 billion to Oracle's non-GAAP operating profit in the first year, increasing to over $2 billion in the second year. This would make the Sun acquisition more profitable in per share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft and Siebel combined," he adds. Which is, perhaps, rather more to the point. Assuming Oracle can weave its magic as it has before, there's handsome profits to be made out of the acquisition at this price. And then there are Java and Solaris: Oracle believes that Java is the most important software Oracle has ever acquired. Oracle Fusion Middleware, which is currently the software giant's fastest growing business, is built on top of Sun's Java language and software. Owning Java not only ensures ongoing technology investment for Oracle's benefit, but could give the organisation even more clout in the computing business. Meanwhile, Sun's Solaris operating system is still the leading platform for Oracle databases. Oracle believes it can now optimise its databases for some of the high-end features of Solaris – although its PR machine says Oracle is as committed as ever to Linux and other open platforms. "Oracle and Sun have been industry pioneers and close partners for more than 20 years," comments Sun Chairman Scott McNealy. "This combination is a natural evolution of our relationship and will be an industry-defining event." Natural? Maybe not. Inevitable, probably.