DealZone

Everyone wants to soak up some Sun

April 21, 2009

rtxdiroThe Wall Street Journal’s Deal Journal blog wrote a post yesterday about how Sun Microsystems, which has agreed to be acquired by Oracle, now looks “less dumb” than before. In the days after IBM walked away from the negotiating table about two weeks ago, the media was rife with comparisons between Sun and Yahoo, which bungled up a $47.5 billion buyout offer from Microsoft last year.

But now we all know why Sun was driving such a hard bargain with IBM, as Deal Journal says. It actually had some negotiating leverage because Oracle was already waiting in the wings.

Sources told me yesterday that Oracle began courting Sun way back in end-February/beginning-March. Initially, the business enterprise software maker sent feelers to Sun about buying just its software business. After all, Sun’s Java programming language and Solaris operating system work very closely with Oracle products.

But Sun, which at the time was also entertaining interest from Hewlett-Packard and IBM, told Oracle it wasn’t quite into selling off the company in chunks, the sources said. Soon after, Sun and IBM entered three-and-a-half weeks of exclusive talks with IBM, even as Oracle let it be known to Sun’s board that it continued to remain interested, the people added.

“Oracle made its interest known,” said one person familiar with the matter. “They were very aggressive in approaching Sun.”

So when IBM refused to meet Sun’s demands for deal assurances — and those were necessary, Sun felt, given the extent of overlap between the two compaies’ businesses and the antitrust scrutiny any potential combination would invite — the Java maker didn’t capitulate and run back to Big Blue.

Instead, the board divvied up into two groups; while one half kept an informal channel open with IBM, the other half called Oracle up, the source said. Then things just started to happen, and Oracle, realized it wouldn’t have to bid against IBM but could get all of Sun for $9.50 a share, or $7.4 billion.

Nicely done, Sun (although competitors are still scratching their heads about this one).

(Photo: Reuters/Rowers make their way as the sun rises over the Alster lake in the northern German town of Hamburg)

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/