Oracle's purchase of Sun to re-shape industry

By Jim Finkle - Analysis

BOSTON (Reuters) - Oracle Corp's (ORCL.O) purchase of Sun Microsystems Inc (JAVA.O) is expected to shake up the tech sector as it turns the software giant into a player in the hardware market and gives it new clout in software.

The $7.1 billion deal, which Oracle reached after the collapse of Sun's talks with International Business Machines Corp (IBM.N), will make it the No. 2 player in the $17 billion market for high-end Unix computers used in corporate data centers. That puts Oracle behind IBM and ahead of Hewlett Packard Co (HPQ.N).

The acquisition also gives Oracle control of Sun's Java software, one of the world's most widely used computer languages, and the Solaris operating system for Unix servers.

"This is a competitor that is much more formidable than Sun standing alone," said Howard Anderson, a lecturer at the MIT Entrepreneurship Center and former CEO of the Yankee Group.

"If I were a Sun customer I was starting to get nervous about Sun. I was worried about their viability. I'm not worried about that anymore. I know that Oracle is going to be there."

Analysts say Oracle, known for its aggressive marketing and tight cost controls, will cut Sun's bloated cost structure and energize a struggling company with 33,556 workers at the end of last year. Sun posted a loss of $1.9 billion in the first half of its current fiscal year.

Sanford Bernstein analyst Toni Sacconaghi predicted that once Oracle takes over Sun, it will likely need to cut another 5,500 to 10,000 positions.

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