Sun Microsystems Harvard Case Solution & Analysis

Sun Microsystems Case Solution


The Sun’s Background

The Sun Microsystems is a leading network-computing firm, which was established on February 24, 1982. It used to build desktop computers, workstations and maintain a large market share with a high profitable company. The Sun is named from the initials of “Stanford University Network”. The key founders of Sun are Bill Joy, Andy, Vinod Khosla. and Scott McNealy. The Sun was expert in inventing new technologies such as; Java Programming Language (JPL), and Network File Systems (NFS). Sun’s profit was not increasing, the founders decided to sell the company and gradually sold their main products such as; computers, computer software, IT services and finally, on January 27, 2010, Sun was acquired by the Oracle Corporation for $ 7.38 billion and at 9.5 per share.

The mission of Sun is to provide network solutions to customers from the computing products, solutions, and services. The vision is to develop a customer centric solution that driven by the future needs and choices of the clients. Their main clients are insurance companies, telecom, publishers, and airlines consumers. The list of their clients includes names like Sony, Motorola, Alcatel, Samsung etc.

The Oracle’s Background:

The Oracle Corporation was the first company that introduced the commercial RDBMS product. The co-founders of the Oracle are Lany Ellison and Robert Miner; it was established in 1977. Their major products are the RDBMS’ version 1, 2, and 3. They not only provide the product to their customers but they also give them continuous client support in order to improve their product and service to their clients. Its main competitors are IBM, Sybase, and Informix. The Oracle Corporation used backward vertical integration in its computer hardware in order to acquire Sun Microsystems.

The case is about the acquisition of Sun by Oracle Corporation that measures the growth strategies of both the Sun and the Oracle, their product lines, and their major competitors. The case also defines the problem faced by Sun in spending in improvement and development of their products, which led to loss and they decided to sell. Oracle held the acquisition despite close bids by IBM, who is its major competitor.

The Problem Statement:

Oracle decided to acquire Sun in 2009, in which Oracle put an offer to acquire at $ 9.5 per share, more than 40% of the current trading price of the share. Sun’s revenue was in decreasing trend and its stock performance was -61.5% until March 2008. Oracle’s objective of acquisition was to combine Sun’s expertise in hardware and other networking in order to get a dominant position in the market.

Therefore, the main problem was to create a valuation model Sun’s Microsystems in order to better estimate the fair price of Sun’s Inc. for its acquisition. Along with this, to accept changes and make sure that the post merge will bring expected profits and efficiency into company’s operations.

Case data analysis

Though Oracle was completely a software development company, it had no idea on how to manage software and hardware integrated computing solutions. The shareholders of Oracle were uncertain of future benefits. Oracle management needed to communicate all shareholders about future growth and ability to make profits and improve the financial performance. Therefore, the Oracle CEO announced dividend payout policy to convince the shareholders for investing in order to acquire the Sun.............

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