Oracle's Ellison vows tech shakeup with Sun deal

on January 28 2010 8:55 AM

REDWOOD CITY, California - Oracle Corp Chief Executive Larry Ellison promised on Wednesday to shake up the technology industry with his purchase of Sun Microsystems Inc, a deal that enables the world's No. 3 software maker to enter the hardware business.

Ellison, 65, the brash billionaire who founded Oracle more than 30 years ago, said the $7.5 billion Sun deal gives Oracle the broadest array of technology products of any company.

The proof will be in the pudding in the integrated products we deliver to our customers, he told customers and analysts at an event at company headquarters in Redwood City, California, timed to celebrate closing the Sun deal.

The combined company will be able to produce everything that businesses use in their data centers, from semiconductors and operating systems to computer servers, databases and accounting software.

That variety will allow Oracle to develop specialized computers that are more efficient but less expensive than ones made using components sold by rivals such as IBM, Hewlett Packard Co and Dell Inc, company officials said.

Ellison reiterated a promise made back in April, when Oracle agreed to buy Sun, that the deal would add $1.5 billion of operating profit during its first year.

He played down the need for layoffs, saying that Oracle plans to hire 2,000 salespeople to sell Sun's high-end computer servers, storage equipment and other hardware. The hardware maker had sold its computers through outside partners.

Ellison also said that Oracle would lay off about half as many people as it hired.

Sun already had job cuts in the works. The company said in October in planned to slash 3,000 jobs, or about 10 percent of its workforce, over about a year.

Analysts expect more layoffs now that the deal has been consummated, although the company has yet to discuss any such job cuts.

Oracle plans to boost investment in new products following the acquisition, President Charles Phillips told the gathering.

Spending on research and development will surge to $4.3 billion in its first full fiscal year after the deal, from $2.8 billion in the prior year.

Sun rose to prominence in the 1990s as a supplier of high-end servers but never fully recovered from the bursting of the dot-com bubble in the early 2000s, which savaged demand for its products.

The Sun deal boosts the stakes in Oracle's long-running rivalry with IBM. Sun is the No. 2 player, after IBM, in the $17 billion market for high-end servers. And Oracle is the No. 1 maker of database software, ahead of IBM.

Oracle said it paid $7.5 billion for Sun, or $5.5 billion net of cash on Sun's balance sheet.

(Editing by Ros Krasny, Gary Hill and Steve Orlofsky)

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