Oracle Agrees to Buy Sun for $7.4 Billion

Oracle Corp. has agreed to buy Sun Microsystems for $7.4 billion, the companies said this morning, putting a new twist on the emerging battle for the enterprise data center. The deal comes just weeks after the collapse of a bid by IBM to purchase Sun at a similar price point. IBM's last offer had been rumored to be valued at about $9.40 a share, while Oracle will pay $9.50. Shares of Sun (JAVA) closed Friday at $6.69.

The deal also allows Oracle to acquire MySQL, the dominant open source database, which was acquired by Sun last year. Oddly, in the press announcment Oracle doesn't mention MySQL, but cites "substantial long-term strategic customer advantages" in acquiring two other Sun technologies, Java and Solaris. Oracle's  Fusion Middleware is built on top of Java.

By buying Sun, Oracle also moves into the hardware business in a more significant way. Oracle partnered with HP last year on a database server, which marked its first foray into hardware. The deal also gives Oracle an entree into the emerging market for cloud computing, where Sun recently announced a new platform.

"The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems," said Oracle CEO 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. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up."

"Oracle and Sun have been industry pioneers and 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."

n recent months Sun has joined the growing crowd of companies providing data center design services to help companies improve the energy efficiency of their facilities, launching consulting services to help customers retrofit existing data centers and design new ones. Sun has sought to showcase its green approach with retrofits of major data centers in Santa Clara and Broomfield, Colo.

Sun was also an early player in the market for data center containers with its Blackbox (since renamed the Sun MD S20) and has acquired open source cloud computing startup Q-Layer.