Oracle Sun Microsystems acquisition cost at $7.4 billion

The Oracle-Sun Microsystems acquisition will cost the Larry Ellison-led company 7.4 billion dollars. The Sun Microsystems acquisition, which came as a surprise, occurred after IBM walked away from talks to acquire Sun a couple of weeks back.

Oracle chief executive Larry Ellison, in a statement: “The acquisition of Sun transforms the IT industry. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up.” Oracle has several acquisitions from the recent past in its pocket so far: Siebel, PeopleSoft and BEA Systems. Oracle said of the acquisition that Sun’s Java is the most valuable software it has ever acquired. The acquisition of Sun Microsystems marks the entry of the software maker into the hardware business.

The Sun Microsystems buyout will come at a price of $9.5 a share for Oracle. Sun Microsystems has been on a slide ever since demand for its high-end server systems collapsed in the wake of the dotcom bust. The acquisition price is a 42% premium to Sun Microsystems’ Friday closing share price.

Oracle and Sun Microsystems said in a joint statement that net of Sun’s debt and cash, the deal value of Oracle’s Sun Microsystems acquisition comes to about 5.6 billion dollars.

Boards of both Sun Microsystems and Oracle have approved the acquisition. Once all the regulatory and shareholder clearances come through, the buyout should be completed by Summer.

Oracle said in a statement that in the first year of the Sun Microsystems acquisition, it expects Sun to bring a revenue of 1.5 billion dollars, which will rise to 2 billion dollars in the second year.

There are some synergies in the Oracle-Sun Microsystems acquisition. While Oracle is into business software, Sun Microsystems builds servers.

Oracle said that on a per share basis, it believes the Sun Microsystems “to be accretive” to its adjusted earnings by 15 cents in the first full year after closing.

The Sun Microsystems-IBM acquisition deal did not go though apparently because of differences in the Sun Microsystems board between Sun co founder Scott McNealy and CEO Jonathan Schwartz.