Sun Microsystems

Abstract

This case is designed for use in Corporate Finance courses at the MBA level or in an advanced undergraduate Valuation class. The primary objective of this exercise is to introduce or reinforce valuation tools in the context of mergers and acquisitions. A teaching note and student spreadsheet accompany this case. This case is written from the perspective of a member of Oracle's valuation team during Oracle's bid to acquire Sun Microsystems in 2009. Sun was an industry leader in the IT sector, and it had many suitors, including IBM. Oracle had distinguished itself as the world's largest and most reputable sellers of database management systems and other related software, and it had recently acquired several low-margin companies and turned them into higher-margin operations. Combining Sun and Oracle had the potential to create the Wal-Mart of the enterprise software industry. Supplemental student and faculty spreadsheets are available to verified users.

Excerpt

UVA-F-1630

Rev. Apr. 25, 2018

Sun Microsystems

Oracle will be the only company that can engineer an integrated system-application to disk—where all the pieces fit together so the 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.

—Larry Ellison, CEO, Oracle Corporation

It was the first time in the last two weeks that Margaret Madison, a member of Oracle's corporate development team, had not stayed in the office until two in the morning. At the close of business earlier that day, Friday, April 17, 2009, Oracle had put in an offer of $ 7.38 billion, or $ 9.50 per share, to acquire Sun Microsystems. Only nine months into her position, Madison, a recent MBA graduate, had found herself to be a member of Oracle's valuation team, assessing a potential merger with Sun. The journey, however, was not over yet. Sun had a number of potential suitors, IBM standing prominently among them, and Madison and her colleagues expected IBM to counter Oracle's offer.

. . .

Keywords: IT, M&A, merger, acquisition, valuation