Anatomy of Oracle's Multibillion-Dollar Sun Acquisition

By Chris Preimesberger  |  Posted 2009-05-12 Print this article Print

An SEC affidavit filed by Sun Microsystems reveals the back story of how IBM, Hewlett-Packard and ultimate victor Oracle submitted competing bids as Sun dealt with the inevitability of a takeover. Surprisingly, IBM and HP were in the hunt until the very last minute, documents reveal.

In an SEC proxy filing May 12 detailing the background behind Oracle's acquisition of Sun Microsystems for a net compensation of $5.6 billion, Sun explained some of the logic behind the proposed deal, which was unanimously approved by Sun's board of directors but also has elicited ire-and three class action lawsuits-from some angry shareholders.

Fundamentally, Sun, which has lost billions of dollars over the last decade since the high-end workstation and server market went south in 2000 and 2001, believed its only realistic chance of surviving the next few years would be to be acquired by a company with products complementary to its own.

According to the SEC document, Sun talked to three potential buyers. Only Oracle, however, was named in the document. Industry sources have told eWEEK off the record that the two other companies were IBM and Hewlett-Packard.

According to eWEEK sources at the time, and verified by the report in the SEC document, IBM was prepared to make the deal and had even gone as far as getting the cash transfer ready. However, Sun's engagement with IBM focused "on the need to address issues of transaction certainty," the document said.

Due to a number of legal and regulatory uncertainties, IBM was not willing to guarantee the completion of the transaction in the case of federal antitrust litigation. The combination of IBM and Sun products would have given IBM a large share of the high-end data center market and the deal would have been subject to possible antitrust investigation.

Another interesting fact revealed in the filing is that Oracle originally proposed on March 12, 2009, to acquire only Sun's software assets and maintain a minority equity investment in common stock. eWEEK was told several days later that HP had, at one point, been interested in acquiring Sun's hardware assets as part of that deal, but this was not mentioned in the document.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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