Oracle Buys BEA, Sun Purchases mySQL and Reports Earnings

Oracle Corp. has agreed to purchase BEA Systems, Inc. in a transaction valued at $8.5 billion. Elsewhere, Sun Microsystems, Inc. announced it will acquire open source database vendor MySQL AB in a deal valued at approximately $1 billion. Sun also released favorable quarterly earnings.

Focal Points:

• Oracle has finally reached a definitive agreement to purchase BEA, ending negotiations that had dragged on for three months and had recently stalled at an impasse. In a decision unanimously approved by BEA's board of directors, the company will receive $8.5 billion in cash, which represents a per-share purchase price of $19.375. This is middle ground between the $21 share price BEA had requested in response to Oracle's earlier $17 per share bid. BEA's WebLogic Java Server will stand as an independent product for the foreseeable future, according to Oracle, and its best functionality will be integrated into Oracle's Fusion Middleware "hot-pluggable" software suite.
• Sun will purchase MySQL for approximately $1 billion in total consideration. The MySQL open source database is widely used as a suitable alternative to other database applications from IBM Corp., Oracle, and others, and has reportedly been downloaded more than 100 million times. The company further states that an additional 50,000 copies of the database are downloaded daily. The companies report that the purchase will further broaden the appeal of the MySQL database by offering Sun's global services support offerings and additional original equipment manufacturer (OEM) relationships with the largest hardware vendors.
• In an additional announcement, Sun also reported improved preliminary results for its second fiscal quarter of 2008. Revenues rose from $3.57 billion to $3.60 billion, while achieving a three percent improvement in gross margins at approximately 48 percent. Net income rose between approximately 73 percent and 99 percent year-over-year, and final results will come in between $230 million to $260 million. Net income in the same quarter in 2007 was $133 million.

Experton Group believes Oracle's acquisition of BEA will have significant positive effects for the company as it strives to become an even larger player in the middleware space. Certainly, BEA and IBM's WebSphere middleware offerings rule the roost as the top players in the space, catapulting Oracle into a key growth area as business requirements dictate enhanced real-time integration of disparate systems to provide additional functionality and business insight. Oracle will likely keep the BEA offering as a separate entity for at least three to five years to support the customer base, but it as yet unclear how and when future enhancements will appear. Oracle may take its typical approach of trying to encourage users to move to the Oracle-branded solution over the long term, so executives should prepare for this and keep the lines of communication open to keep abreast of future movements.

The Sun acquisition of MySQL is a key coup for Sun as it tries to improve its perception, profitability, and market presence. MySQL is one of the most widely recognized, respected, and used open source offering – and certainly the most used open source database. Sun's ability to assist with development, offer additional support offerings, and provide further OEM relationships should be a boon to Sun, MySQL, and their customers. Sun's second quarter results are a real step in the right direction for the firm. Though revenues are not growing rapidly, the improvements in gross margin and net income demonstrate that the company is able to achieve far better numbers without the overhead it has worked hard to release over the last 12 to 18 months. IT executives should still feel secure in dealing with Sun as a preferred enterprise vendor, but the company still has challenges ahead of it as it tries to regain the market presence and leadership position it commanded before the Internet bubble burst. As stated by Sun, executives should look for its future direction to be centered largely on application development (Java), open source database (MySQL), operating system (OpenSolaris), and innovative offerings.