Oracle vertically integrates paying $7.4B for Sun

Stan Beer
Monday, 20 April 2009 20:05

Business IT - Technology

In what is being viewed as a move to vertically integrate its business, business software giant Oracle has agreed to buy struggling servers hardware  vendor Sun Microsystems for US$7.4 billion cash. The deal should come as welcome to Sun jusr two weeks after acquisition talks with IBM broke down.

The deal will see Oracle pay a more than 40% premium of $9.50 a share for the company whose founder Scott McNealey coined the phrase “the network is the computer”.

Sun was at one time a rising star in the Unix servers business, with its Solaris operating system and Sparc based proprietary servers.

However, the commoditisation of the servers business through the x86 platform has bitten deeply into Sun’s bread and butter.

While Sun is primarily considered to be a hardware company, it does have some considerable software jewels in its crown. Aside from Solaris, Sun  was the developer of the Java software development platform and owns Star Office, the commercial version of Open Office.

From Oracle's point of view - or least what its boss Larry Ellison claims - the Sun purchase will give Oracle a one-stop-shop or "applications to disk" capability, where the company could offer customers a tightly integrated hardware and software solution.

Commentators at this stage seem unsure about the wisdome of Oracle's strategy with this purchase because it's the first time the software giant has ventured boldly into the hardware space.

However, many note that previous acquisitions for Oracle such as PeopleSoft, Siebel and Bea have been successful.

In addition, as some pundits point out, Sun is not just a hardware company but is also strong in the software platform space. And the vertical integration of major computing conglomerates in the mould of IBM and HP, with hardware, software and services appearsto be where the market is heading.