Did Oracle really want Sun's hardware business?

 

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By Barry Collins

Posted on 13 May 2009 at 08:48

Newly released documents reveal that Oracle was only interested in buying Sun's software assets, just weeks before it completed the $7 billion takeover.

Oracle boss Larry Ellison has spent the past fortnight protesting that his company sees Sun's hardware as a strategic asset, and won't be selling off the hardware business once the merger is complete.

However, Sun's filing to the US Securities and Exchange Commission on the merger paints a very different picture.

It reveals that as recently as March, Oracle was only interested in Sun's software. "On 12 March 2009, Oracle sent a letter to our board proposing the acquisition by Oracle of certain of our software assets, a minority equity investment by Oracle in our common stock and entering into certain strategic relationships," the filing states.

The filing also states that Oracle and an unnamed "Party B" later investigated a joint acquisition, suggesting Oracle may have had a partner lined-up to take over the hardware side. "On 6 April 2009, our board met to discuss certain inquiries we had received from Oracle and Party B and the impact on the company and our employees, customers and other business partners of the media reports suggesting that we were seeking a strategic transaction," the filing reads.

"Following this, our management and advisors recommenced discussions with Oracle and Party B with regard to a possible transaction. Party B recommenced its due diligence investigation of the company on April 9, 2009."

Sun weaknesses

The filing paints a rather dismal picture of Sun's business, with the company admitting it was caught in a serious decline.

"Sun's revenues have deteriorated as a result of declines in IT spending during the current economic crisis," the filing states. "This industry-wide downturn has particularly impacted Sun because Sun derives a significant portion of its revenues from the financial sector, which has been especially impacted by the current economic environment."

"Relative to some of its competitors, Sun's revenue base is concentrated among a smaller number of larger customers, whose diminished spending has not been adequately offset by acquisition of new customers or entry into adjacent markets," it adds.

It also states that "Sun is less diversified than some of its peers and has a more narrow portfolio of businesses to help offset declines in a given industry or product segment."