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Larry Ellison Now Owns Sun; Planet Earth May Be Next


Oracle adds hardware to its arsenal.

Oracle (ORCL) CEO Larry Ellison has expanded his empire, snapping up Sun Microsystems (JAVA) after IBM (IBM) failed to acquire the server maker. Which recalls that old chestnut:

Q: What's the difference between God and Larry Ellison?
A: God doesn't think he's Larry Ellison.

Oracle agreed to pay about $7.4 billion, including cash and debt. The per-share price is $9.50, or about 42% higher than Sun's closing price on Friday, April 17.

Oracle acquired Sun's Java technology and Solaris operating-system software. Oracle is the world's second-largest software developer. It's spent about $34.5 billion on acquisitions since 2005.

Sun Microsystems needed the deal after reporting losses in 3 of its last 4 quarters as server sales fell. Some analysts questioned Sun's ability to survive as a stand-alone company.

Oracle says the deal will add about $1.5 billion to its operating profit in the first year, and about $2 billion in the second year.

Sun's Solaris operating system goes head to head with Microsoft (MSFT) Windows and Linux, an open-source package.

Sun says software sales increased 21% last quarter and it expects sales to reach about $600 million a year. In the last fiscal year, Oracle reported software sales of $17.8 billion.

Sun's discussions with IBM collapsed earlier this month when the companies couldn't agree on a price. IBM's software sales trail Oracle and Microsoft.

Oracle says it's the world's largest business software company with about 320,000 customers.

Sun was founded in 1982 by Andy Bechtolsheim and Bill Joy. Bechtolsheim developed a "workstation" for the Stanford University Network -- SUN -- that evolved into the company's first product. Joy developed the foundation for Sun's Unix-based operating system.

Sun's market value once hit about $200 billion and the company said it provided the "dot in dot-com." Sun once considered buying Apple (AAPL) when the computer maker struggled.

Sun pioneered the idea of network computing, or the idea that computers would be more powerful and efficient if linked together. Sun's early computers sold well at universities and government agencies, and formed a key element in the early development of the Internet.

But Sun's expensive products built on proprietary systems couldn't compete against less-expensive equipment using chips developed by Intel (INTC) and Advanced Micro Devices (AMD).

Sun's board of directors unanimously approved the deal, which is expected to close this summer.
No positions in stocks mentioned.
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