Sun Shareholders Say Aye to Oracle Merger
As of today, the shareholders of Sun Microsystems have approved the merger with Oracle at a meeting at Sun's offices in Santa Clara, California. Announced on April 20th, Sun will be bought for $9.50 a share in cash, a grand total of $7.4 billion.
Thus far, the merger has encountered some bumps in the road. Despite confident statements from Oracle predicting the closure of the deal this summer, an antitrust investigation by the U.S. Department of Justice is underway. The DOJ extended the window for looking in to the company past the usual 30-day limit.
It may not be the sign of an overwhelming mandate, but the results of this special shareholder meeting certainly signal confidence that the merger will be approved.
Photo credit: Javier Vidal Postigo
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The problem here is that this merger will not create true shareholder value in the long run. Sure, a competitor is eliminated, but there is a reason why they existed in the first place, and that’s not going away. The hardware these companies produce aren’t yet a commodity, IT professionals weigh their purchasing decisions very carefully. There are pros and cons to each of these brands. So, the combined company has to either maintain both product lines in order to keep the benefits of each intact, or carefully merge the brands / product together into a new platform. If they do, it’s just a third brand with its own pros and cons…it just has no competition. How long will that last? Not long if IBM has their way. If both brands / product lines are maintained, where is the synergy? The value of this merger will only be felt for several years, and it’s doubtful they will be able to cover the cost of the deal along with the integration expenses in that time. This is simply a case of an acquisition made out of ego that will eventually erode shareholder value.
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