Oracle to buy Sun for $7.4B after IBM drops bid

SAN FRANCISCO -- The startling deal, Oracle's first hardware acquisition, steps up Oracle's bid to become a one-stop technology shop for more than 300,000 corporate, government and academic customers. It also effectively ends Sun's 27-year history as Silicon Valley's maverick independent.

"With the acquisition of Sun, Oracle is now able to make all of the pieces of the technology stack fit together and work well," Oracle CEO Larry Ellison said in a conference call Monday.

Though far from Oracle's biggest acquisition in a four-year shopping spree that has cost more than $40 billion, it could be the most strategic.

Oracle could deftly use Sun's products to enhance its own software. Sun's Java programming language is used to develop applications for websites, mobile phones and even DVD players. Sun's Solaris operating system is a leading platform for Oracle's database software.

Java is the "single-most-important software asset we have ever acquired," Ellison said.

Sun CEO Jonathan Schwartz predicted Oracle will be able to offer its customers simpler computing solutions at lower prices by drawing on Sun's technology.

Under the deal, Oracle will pay $9.50 in cash for each Sun share.

IBM offered just a dime a share less, but acquisition talks withered this month in a squabble over price and the extent to which IBM was willing to see the deal through an antitrust review. A deal with Oracle likely won't face the same antitrust hurdles because there is far less overlap between the two companies. The merger requires approval from the Justice Department and European Union.

IBM, which reported a sharper-than-expected 11% drop in first-quarter revenue and slightly lower profit Monday, had no comment on Oracle's early-morning surprise.

Sun shares soared 37% to $9.15 in trading Monday. Oracle slipped 1% to $18.82. Just a few weeks ago, Sun shares were less than $4.