Sun is buying MySQL in $1B deal

SAN FRANCISCO — Sun Microsystems' deal to buy Swedish open-source software company MySQL for $1 billion deepens Sun's bet that its road to prosperity lies in distributing free software that generates hefty maintenance fees and could sell more servers.

The acquisition, announced before the market opened Wednesday, gives Santa Clara-based Sun a foothold in the rapidly expanding market for database software for Web-based companies.

MySQL has a significant presence in Seattle, where its first U.S. headquarters opened in 2001. The U.S. headquarters office moved to Silicon Valley in 2003 but MySQL still has about 30 engineers in Seattle, including its technology director, Brian Aker.

Separately, Oracle said Wednesday it has agreed to buy Silicon Valley rival BEA Systems for $8.5 billion in a deal culminated after several months of acrimony.

The BEA acquisition extends a three-year spree in which Oracle has spent about $35 billion buying dozens of its smaller competitors in its push to create a one-stop shop for business software.

MySQL's software is used by some of the world's biggest Web sites to archive and retrieve information, and with people creating more Web content every day, demand for those services is quickly growing.

Sun is paying $800 million in cash and assuming $200 million in options to acquire MySQL. The company makes open-source database software used by companies such as Google, Facebook and Finnish phone maker Nokia.

Sun said the deal will help spread MySQL's software to large corporations, which have been the biggest customers of Sun's servers and software, and boost its distribution through Sun's relationships with other server makers such as IBM and Dell.

Sun thinks it can sell more server computers and ring up higher maintenance fees by also offering software whose source code is publicly available for free.

MySQL competes with nonopen-source offerings from Microsoft and Oracle, which dominate database software for traditional businesses.

However, MySQL is the rapidly growing market leader in open-source database software, particularly among Web-based companies, where it commands about 80 percent of the global market, according to Sun Chief Executive Jonathan Schwartz.

Microsoft is less than 10 percent of that market, he said.

"We are really acquiring a database that customers and Web companies across the world have moved to at a breathtaking clip," Schwartz said. "The titans of the Web all use MySQL — banks, automobile companies, pretty much all of the Fortune 500 runs MySQL in their shops."

"This gives us access to every hot Web company on Earth, and every company that will be hot 5 years from now," Schwartz said.

Sun shares rose 55 cents, or more than 3 percent, to $15.53 Wednesday.

BEA represents Oracle's most expensive purchase since it paid $11.1 billion for PeopleSoft in early 2005.

The all-cash price of $19.375 per share represents a 24 percent premium from BEA's closing stock price Tuesday. It's a 42 percent improvement from where BEA's shares stood before Oracle launched an unsolicited bid of $17 per share that was rebuffed almost three months ago.

Oracle's dogged pursuit of BEA underscores how much it prizes BEA's so-called "middleware" — computer coding that helps business programs run more smoothly on underlying databases.

Already entrenched as the leader in the database market, Oracle in recent years has been building up an array of business applications software to challenge the front-runner in that segment, Germany-based SAP.

BEA's products, already used by about 15,000 customers, will give Oracle another potential selling point with companies looking for a suite of software from a single vendor in an effort to make their technology run more smoothly. Adding BEA also will help Oracle become a more formidable challenger to IBM in the middleware market.

"This combination with BEA gives us what we need — a leadership position in every level of the software stack," Oracle Chief Executive Larry Ellison said Wednesday.

Ellison, who had been eyeing BEA for years before finally pouncing in October, shortly after billionaire investor Carl Icahn acquired a large stake in BEA and began calling on its board to take steps to boost the company's sagging stock.

"At the risk of being immodest, this deal wouldn't have been done if I hadn't been there," Icahn said in a Bloomberg Television interview.

BEA's shares surged $2.88, or 18.5 percent, to finish at $18.46 Wednesday while Oracle shares added 61 cents to close at $21.92.

Oracle's stock price has risen by 60 percent since 2004 as Ellison and his top lieutenants have overcome skepticism about the company's ability to keep customers happy while blending the disparate products that have been added from its vanquished rivals.

Information on Seattle MySQL presence provided by Seattle Times technology columnist Brier Dudley. Information on Oracle-BEA deal provided by Associated Press reporter Michael Liedtke.