(Adds Benchmark Capital partner comments, updates shares)
By Duncan Martell
SAN FRANCISCO Jan 16 Sun Microsystems Inc
JAVA.O said on Wednesday it would buy Swedish open-source
developer MySQL AB for about $1 billion to expand into the $15
billion database market, and that preliminary quarterly results
showed no impact from the slowing U.S. economy.
Sun shares rose more than 6 percent, which analysts said
had more to do with Sun's results easing concerns about its
financial services customers than about the acquisition.
Sun and its Chief Executive Jonathan Schwartz have sought
to emphasize the company's small but fast-growing software
business, which includes the Solaris operating system and Java
programming language. If Sun is successful with MySQL, whose
database software is used by huge Internet sites such as
YouTube and FaceBook, it could mean increased bundled sales of
support for MySQL and more hardware sales.
"Sun is looking for new growth engines, and this is one of
the areas they're going to try and make a bet on," said Pacific
Crest Securities analyst Brent Bracelin.
Schwartz said in an interview that Sun was not seeing less
interest in the Internet from consumers due to the U.S.
economic slowdown, and pointed to 7 percent growth in its
bookings for the December quarter.
"In times of recession, companies look to technology to
drive efficiency," Schwartz said.
Forrester Research analyst Mike Gilpin said the acquisition
was not so much about going head to head in the database market
with Oracle Corp ORCL.O or IBM (IBM.N), but about
strengthening its position in helping to run the Internet.
"This is Sun girding its loins for battle against Microsoft
in terms of who's going to run the Web," he said.
Many of the biggest Internet sites are built on what is
known as a LAMP software bundle: a combination of the Linux
operating system, a Web server from open-source provider
Apache, MySQL, and the PHP computer programming language.
"Sun is very enthusiastic about making the LAMP (software)
stack available in a scale-out way to their customers," Gilpin
said, referring to a vast collection of Intel servers lashed
together in a high-speed network.
BOLD MOVE FOR SUN
Sun said it would pay about $800 million cash for all MySQL
stock and assume about $200 million in options in the deal.
Analyst Trip Chowdhry of Global Equities Research said the
price was too steep, noting "less than 1 percent of MySQL users
Although MySQL did not disclose revenue or profit figures,
Kevin Harvey, general partner at Silicon Valley venture firm
Benchmark Capital, which has a 26 percent stake in MySQL, said
the company was growing "extremely well."
Harvey, who has been involved in the sale of companies like
TellMe Networks to Microsoft Corp and Zimbra to Yahoo! Inc,
said the acquisition "solidifies (Sun's) position as a very
large open source vendor."
Sun said it expects MySQL's open-source database, widely
used across operating systems, hardware vendors and
applications, to bring new markets for Sun's systems, software
and other technologies.
Sun said it expected the deal to add to its fiscal 2010
operating income, and to close late in the third quarter or
early fourth quarter of its fiscal 2008.
Sun also said it expected revenue for its fiscal second
quarter ended Dec. 30 to show a rise of about 1 percent to $3.6
billion. Analysts were expecting $3.58 billion, according to
Sun said net profit would range between $230 million to
$265 million, or 28 cents to 32 cents per share, up from $133
million, or 15 cents per share, a year earlier.
The company said gross margin in the quarter was around 48
percent, up about 3 percentage points from a year ago. Net
bookings were seen up 7 percent at $3.85 billion.
Sun shares were up 89 cents, or 5.9 percent, at $15.87 in
(Additional reporting by Anupreeta Das in San Francisco,
Michele Gershberg in New York and Jim Finkle in Boston; Editing
by Gunna Dickson, Toni Reinhold)