Oracle Closes Sun Deal; Takes On IBM, Dell, HP

Oracle closed its purchase of Sun Microsystems yesterday, a deal that promises to shake up the technology industry as the world’s No 3 software maker enters the hardware business. Executives at Oracle said the $7.5 billion deal, begun nine months ago, gives it the broadest array of technology products of any company. The combined firm will be able to produce everything that businesses use in their data centres, from semiconductors and operating systems to computer servers, databases and accounting software. That variety will allow Oracle to develop specialised computers that are more efficient but less expensive than ones made using components sold by rivals such as IBM, Hewlett Packard and Dell, company officials said.

“We want to change the way people buy systems, the way they run systems,” Oracle President Charles Phillips told several hundred Oracle customers and analysts gathered at the company’s headquarters in Redwood City, California. Phillips said Oracle plans to hire 2,000 salespeople to sell Sun’s high-end computer servers, storage equipment and other hardware. The hardware maker has traditionally sold its computers through outside partners. The hiring will help offset some job cuts already in the works. Sun said in October it planned to slash 3,000 jobs, or about 10 percent of its workforce, over about a year.

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Analysts expect more layoffs now that the deal has been consummated, although the company has yet to discuss any such job cuts. A company spokeswoman declined comment ahead of a speech planned later by Oracle Chief Executive Larry Ellison. Oracle also plans to boost investment in new products following the acquisition, Phillips said. Spending on research and development will surge to $4.3 billion in its first full fiscal year after the deal, up from $2.8 billion in the prior year.

Sun rose to prominence in the 1990s as a supplier of high-end servers but never fully recovered from the dot-com bubble burst in the early 2000s, which savaged demand for its products. The Sun deal boosts the stakes in Oracle’s long-running rivalry with IBM.

Sun is the No 2 player, after IBM, in the $17 billion market for high-end servers. And Oracle is the No 1 maker of database software, ahead of IBM. Oracle said it paid $7.5 billion for Sun, or $5.5 billion net of cash on Sun’s balance sheet. (Reuters)