Anatomy of Oracle's Multibillion-Dollar Sun Acquisition

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.

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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.