Oracle buys Sun Microsystems

Oracle Corp. will acquire Sun Microsystems Inc. in a stock transaction valued at approximately $7.4 billion, or $5.6 billion net of Sun’s cash and debt.

The companies announced today a definitive agreement under which Oracle will acquire Sun common stock for $9.50 per share in cash.

The acquisition, which follows IBM Corp.’s failed attempt to buy Sun, will give Oracle Sun’s Java technology and the Solaris operating system software.

There are substantial long-term strategic customer advantages to Oracle owning the two key Sun software assets, Java and Solaris, Oracle officials said in announcing the acquisition.

“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,” they said.

Government agencies, particularly those in the defense and intelligence communities, are major users of Solaris, especially Trusted Solaris and Solaris Trusted Extensions, both of which can be used for networks with sensitive classification levels.

“Oracle Fusion Middleware, Oracle’s fastest growing business, is built on top of Sun’s Java language and software. Oracle can now ensure continued innovation and investment in Java technology for the benefit of customers and the Java community,” the officials added.

Oracle, the world’s second-biggest software maker, has spent almost $34.5 billion on purchases since 2005, making it the most acquisitive software company in the world, according to Bloomberg News.

The acquisition of Sun transforms the information technology industry by combining best-in-class enterprise software and mission-critical computing systems, said Oracle Chief Executive Officer Larry Ellison.

“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,” Ellison said. “Our customers benefit as their systems integration costs go down while system performance, reliability and security go up.”

Oracle and Sun have been close partners for more than 20 years, said Sun Chairman Scott McNealy. “This combination is a natural evolution of our relationship and will be an industry-defining event,” he said.

The Sun board of directors has unanimously approved the transaction, which is expected to close this summer, subject to regulatory approvals and customary closing conditions.

Oracle, of Redwood Shores, Calif., ranks No. 59 on Washington Technology’s 2008 Top 100 list of the largest federal government prime contractors.