Oracle and Sun
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Oracle and Sun
Mergers and other forms of corporate restructuring have been used over the years as a big tool in improving today is corporate world and global finance (Jackson, 2009). Every day, different Markets and Stock Exchanges have been having different merger and acquisition transactions, and have seen separate companies coming together with the aim of forming larger companies that can competently compete in the market world. For instance, when mergers are not going to create bigger companies from the existing smaller ones, the corporate financial dealings will tend to reverse and by so doing breaking the companies. This can be done through tracking the companies’ stocks, the spinoffs, and carve-outs.
Such deals can therefore be important to companies if well managed. Monitoring processes will tend to ensure that there is constant monitoring of the fortunes of these companies, and even for the coming years. Mergers can even result in a well new performance of the companies hence giving the product company a great campaign in the market (Homan, 2009). It is also important to note that deals to do with mergers tend to attract headlines, and this means a lot to the stakeholders and shareholders of the involved companies. In order to understand some of these issues and impacts of mergers to the shareholders we will look at the ongoing merger between Sun Microsystems and Oracle Corporation.
Impact of the merger between Oracle and Sun on Shareholders
There have been a number of tensions concerning the increasing tensions between the United States administration and the regulators at the European Union over the possible game-changing of hands with the Oracle Corporation and Sun Microsystems merger (Jackson, 2009). A number of Anti-trustees in Europe have been concerned that this 7.4 billion Dollars deal may bring about competition within the open database source within the existing market. For instance, the MySQL, which is an open database source is currently in the hands of Sun, and is in maximum competition to the Oracle Corporation. The regulators at Europe have been putting pressure at Oracle to sell MySQL, which is freely available to a third party. This is because there are fears that Oracle might kill it due to neglect, thus eliminating potential rivalry, which has pushed database prices further down.
There are a number of questions that need be addressed. For instance, how will a merger impact on the shareholders of both organizations? Since the companies have already entered a deal for this merger, Oracle is aiming to buy Sun Microsystems at a whole price or at some given share values. This means the deal is inevitable after the woes faced at Sun. Having merged, it is possible that the deal would have double effects on the shareholders of these companies. With the Oracle shareholders, there is a possibility that their share values may increase upon constant share trading. This is because there will be an increase in share value within the company is trading in the stock exchange. Looking at the other side of the coin, share values within the stock markets may never be predictable, and therefore we may have no much impact in terms of shareholder value. However, the possibility is that the shareholders of Oracle might tend to benefit from such a merger (Jackson, 2009).
With Sun Microsystems, the impact may be different. This will depend on the nature of merger and acquisition to take place. This means that, if the company is sold, the shareholders will have to lose since the shares will be sold at much smaller values than the initial share value. Therefore, it would be necessary to agree that it will be better for the shareholders of Sun Microsystems if the company's shares change hands to the Oracle Corporation.This is because, on its own, the Company may continue plunging itself in further losses which may result in weaker share values in the coming days.
Financial Condition of Both Corporations
Looking at the two corporations, Oracle stands at a better financial position as compared with Sun Microsystems. Most of the Shareholders of Sun Microsystems have been embracing merger after the company faced a turbulent economic meltdown following the global economic recession (Jackson, 2009). This means that Oracle has a better financial standing than Sun and the reason it has been interested in the purchase of some of the service provisions of the other corporation. Oracle has recently announced its plans of acquiring Sun at around 9.50 $ per share, or purchase it entirely at cash value of 7.4 Billion USD. Sun has been trying to struggle its growth in business operations, but the global financial recession took the company on a heavier toll, and hence giving competence to most of its competitors. Later in August this year, Sun Microsystems announced that most of its sales in the year’s second quarter had fallen by a third as compared to a similar time in the previous year. This has been recorded at 2.5 Billion USD. Therefore, upon the merger, Oracle Corporation expects such a deal to add its earnings for the first year upon initiation (Julius, 2009).
Profitability of the Merger
Once the merger and acquisition has taken place, there is a possibility of having more profitable business than when the two run separately. Looking at it keenly, the Oracle Corporation will have the mandate to control the business operations and hence it will be able to embark on fewer expenses when running on its own. Since most of these databases would require fewer operators, it is necessary that there will be lesser expenses within the operations. This might translate to better profits. The amount of expenses and salaries paid would also be reduced hence increasing gains.
Also, such a merger brings the better of the two hence providing services to different number of customers, and this way improving customer-participation. For instance, the two, hence coming up with reputable and long-lasting solutions to problems thus bringing about profitability (Julius, 2009), can address some of the key issues that may have troubled the two separate companies. If there is maximum customer trust with this merger and acquisition, definitely it would result in better profits. Since we now know about the financial standings of the two, a merger appears necessary to bring the financial woes at Sun Microsystems.
If the customers fail to embrace a merger, definitely the corporations would be facing one big pitfall. This is because the customer consent is what brings about the success of a merger (Julius, 2009). This means that all the clients and stakeholders should be given priority in determining the direction of the merger. All issues should be addressed so that such a merger can result in business profitability. This would be necessary in ensuring that the merger does not result in failed business. This means that all the conflicts of interests like the MySQL servers should be solved immediately and come up with permanent solutions for the future of the merger.
Once this merger has been effected, it would be realized that there would be better business operation at Oracle. This would help pull Sun Microsystems from its worries due to economic impacts that have been harsh on the company. As more and more economic impacts continue to be felt with the ongoing economic recession, it would be necessary that different companies come up with mergers and acquisitions so that such companies do not collapse. Another important thing would be selling of a given organization or firm once the present management has been able to make profitable operations and decisions within the business and its operations.
Homan, R. L. (2009). Will Oracle absorbs Sun Microsystems? Business Journal, 23(45), 81-97.
Oracle in possible merger with Sun Microsystems. (2009. April 23). Business News, p. A5.
. 23(33), p. 67. Retrieved August 12, 2009, from < http://www.itworldcanada.com/news/sun-shareholders-ok-oracle-merger/136131>
Julius, N. (2009). Business Mergers and Acquisitions: New Jersey: Prentice Hall.