Patents with Benefits

Google is spending $12.5 billion to buy Motorola Mobility. But the big prize isn’t Motorola’s lineup of cellphones, computer tablets and cable set-top boxes, It’s Motorola’s more than 17,000 patents — a crucial weapon in an intellectual arms race with Apple, Microsoft and Oracle to gain more control over the increasingly lucrative market for smartphones, tablets and other mobile devices.

Google has $39 billion in cash and can easily afford it, the price translates to $40 per share, 63 percent above Motorola’s stock price before the deal was announced.

However, it might be a good short term strategy, long term impacts are yet to be seen.

Should Android OHA worry?

Android partners including HTC, Samsung, SonyEricsson have showed a strong support to Google’s move, at least publicly. Its hard to say it now if they are actually worrying of being a competitor to Google. All partners have heavily invested in android platform, and there is no looking back for them, if Google builds an apple like strong hardware-software tight-coupling, Open handset alliance is going to shatter. But won’t let that happen, they would do anything to keep Android green.

Its going to be hard

And by getting Motorola employees onboard, Google now has 48,000 employees 60% up from 29,000 that it had previously. It would not just be the biggest ut also the largest employee-on-employee acquision in Tech sector, ever.

Early on, investors hate it. Google stock has gotten smacked in the pre-market. It would be harder for Google to convince almost all its investors.

Other Benefits

Buying Motorola also would push Google into phone and computer tablet manufacturing, competing with other device makers who rely on Android. The largest makers of Android devices are all supporting a deal that Google CEO Larry Page said was too tempting to resist.

“With mobility increasingly taking center stage in the computing revolution, the combination with Motorola is an extremely important step in Google’s continuing evolution,” Page told analysts in a conference call Monday.

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Google has given the biggest number in the industry by acquiring 23 companies, 3/4th of which are venture financed or angel-backed. On the other side of the road, Twitter, still hasn’t figured out a sustainable revenue model, made three acquisitions related to social media and analytics. IBM absorbed much of the enterprise software market and bit on the Hardware side as well.

Microsoft’s silence in 2010 has a solid reason –the biggest acquisition failure of Yahoo! As per CBInsights, the Microsoft is losing out on the top start-up technologies, although, there’s no doubt on how comfortably Microsoft can acquire nearly any (and every) start-up, but they are just not doing it, at least not publicly.

Facebook: Surprisingly, Facebook has jumped ahead of many of the tech companies Cisco, Oracle, etc. Of course, many of Facebook’s acquisitions are of the small tuck-in variety recruiting talent or interesting capabilities for the social networking giant.

HP: Unlike Facebook with it’s smaller acquisitions, HP has been making larger acquisition deals (4 x $1+ billion) with the aim to push technology, products and services to a new level.

Cisco: Cisco which has record of making large number of acquisitions had been slow this year with only 4 mergers.

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Intel, the biggest chip-hardware player, is buying software/security maker McAfee for $7.7 billion, a huge 60% premium  over yesterday’s market price.

Acquisitions like this one are Really rare in the Tech industry, here’s why:

• Intel bought a company which is almost as big as itself.
• A core Hardware company buying a core security software company.

However, Intel believes that security has become an integral part of computing, which makes it their business, too.

“With the rapid expansion of growth across a vast array of Internet-connected devices, more and more of the elements of our lives have moved online. In the past, energy-efficient performance and connectivity have defined computing requirements. Looking forward, security will join those as a third pillar of what people demand from all computing experiences,” said Paul Otellini, Intel president and CEO.

McAfee will operate as a wholly-owned subsidiary, and it will be reporting to Intel’s Software and Services Group.

The full press release is here.

Here’s the rationale for Intel:

• Acquisition enables a combination of security software and hardware from one company to ultimately better protect consumers, corporations and governments as billions of devices – and the server and cloud networks that manage them – go online.
• Intel elevates focus on security on par with energy-efficient performance and connectivity. The acquisition augments Intel’s mobile wireless strategy, helping to better assure customer and consumer security concerns as these billions of devices connect.
• Intel has made a number of software-related acquisitions of leaders in their respective industries that also rely on great silicon, including Wind River, Havok and now McAfee.

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The business proposition is easy: The dying Motorola’s business would prove out to be profitable for Nokia Siemens, as they now achieve #3 spot in Top wireless network vendors in the United States and hence expand business propositions with Motorola’s existing customers.

The acquisition gives  Nokia Siemens 7,500 employees plus solid relationships with Clearwire, Sprint Nextel, Verizon Wireless, Vodafone, and China Mobile.

In the press release from NSN, Rajeev (CEO) said “Motorola’s current customers will continue to get world-class support for their installed base and a clear path for transitioning to next generation technologies while employees will join an industry leader with global scale and reach. Nokia Siemens Networks will see the benefits of a deal that is expected to enhance profitability and cash-flow and to have significant upside potential.”

But at the end of the day, ROI of the  acquisition will depend on how successfully the operations of the two companies are merged  and how well they streamline the development, manufacturing, distribution, bringing overall efficiency.

The acquisition is also aimed to build a stronger infrastructure for 4G/LTE wireless networks being setup all around US.

Most of the industry leading Telecom operators, like Verizon, believe that this is good move for the betterment of wireless industry.

Motorola intends to build a separate entity called  ”Motorola Mobility” out of its cellphone division which has got some industry appreciation after the launch of Android smartphones starting with Droid and then Droid X, but that plan has been postponed due to heavy losses in that unit.

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3D desktops can add a lot of utility to your multitasking. We’ve seen how we can get a 3D desktop on Ubuntu, Bumptop adds the third dimension to both Windows and Mac to make it look like a “Real world desktop”. You can create visual “piles” of files or stick notes to the wall, size design, layout everything is there after fully customizable. In addition, there’s also a cool search feature that’s invoked simply by typing.

Watch the video, Experience speaks for itself:

But wait a minute, What’s Google going to do with BumpTop?

Google hasn’t said anything about the deal yet. The most likely area seems to be its upcoming Chrome OS or even Android operating system for smartphones and more evidently the upcoming Chrome OS/Android Tablet PC.

BumpTop can give facelift to Android/Chrome OS’s interface giving it a step ahead of Apple’s iPad and iPhone.

BumpTop raised $1.65 million in funding.  The acquisition price was probably between $35 and $40 million, confirmed figure is still unavailable.

Ironically, BumpTop was also part of Microsoft’s BizSpark program, which offers free software and mentoring to startups.

[via BumpTop]

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When Google started with iGoogle, one of the first companies to design AJAXy widgets was LabPixies. Over the years, Google worked closely together on a variety of projects, including the launch of a number of global OpenSocial based gadgets. And finally, they decided that they are better off being part of the same team, and hence acquired LabPixies.

Apart from iGoogle gadgets, Google aims on developing next generation webapps and leverage their expertise to change the face of the web.

One of the other primary motivators is the fact that LabPixies ranks as the Top personalized homespage service’s developer.  ”We are looking forward to working with Labpixies to develop great web apps and leverage their knowledge and expertise to help developers and improve the ecosystem overall” said Google’s Dan Loeb:

The team will be based in our ever-growing Tel Aviv office and will anchor our iGoogle efforts across Europe, the Middle East, and Africa. We are looking forward to working with Labpixies to develop great web apps and leverage their knowledge and expertise to help developers and improve the ecosystem overall.

What LabPixies is good at, however, is taking a game on the Web and creating versions of it across different platforms, especially the iPhone and Android. Its iGoogle gadget games may generate as many as one billion impressions a month, but it makes all of its money on the iPhone. Now, Google will likely try to sprinkle some of that LabPixie innovation on Android. One strategy could be to create games and apps first for iGoogle, or add reach to to more users via social web.

LabPixies’ purchase price is at about $25 million, is expected to give out much higher ROI.

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The acquisition is estimated to be around $300 million. As a result of the deal, Bharti Airtel control of the management and the board of Warid.

Airtel has long aspired to expand into international market, and this becomes the second practical step. In actual, this was the third attempt, the last one was with MTN Group, South Africa which didn’t get through approval from government. In addition to this years’ deal, last year also Airtel launched operations in Sri Lanka where it fetched over 1 million customers.

With a population of over 160 million, and with only 32 out of 100 people having telephones, Bangladesh is a promising market for growth for Airtel.

The Indian mobile services market is meanwhile also growing. India added 17.65 million new mobile subscribers in November, taking the total to 506 million, according to Telecom Regulatory Authority of India.

Bharti Airtel had about 116 million subscribers at the end of November.

Due to the Strong competition, India happens to have cheapest mobile voice calls in the world: The tariffs for Airtel are below INR 0.01  which is roughly US$0.0002 per second for voice calls. And the cheapest one goes even beyond upto 0.01 INR for 6 seconds as provided by TATA DOCOMO for limited groups.

The competition is on the large, and its tough for Telecom companies in India to operate at very low margin. Rising to the intentional market means alot more sense.

Previously, Google had acquired AdMob for $750 million, and here is apple acquiring a similar company for $275Million. Both innovative start-ups are aimed squarely at the fast-growing market to advertise on smartphones, such as Apple’s iPhone and Google’s Android devices.

Google’s strategy looks clear: Dominate Mobile OS market (android) followed by Handset market (Nexus one) then do something they do best: Advertise.

Competitors in the a mobile advertising space are still many, despite these big acquisitions, including Millenial Media and Jumptap, both of which are now clearly in play to other players from telcoms to other device makers to big Internet companies.

At the moment,  Apple spokesperson declined to comment about the deal, the official word is expected to be seen as early as today. Stay tuned.

About Quattro:

Quattro Wireless is the leading global mobile advertising company, empowering advertisers and publishers to reach and engage their target audiences across mobile web, application and video platforms with unrivaled precision, transparency and ROI.

Employing Q Elevation^TM dynamic targeting technology to optimize every impression, the company’s ad serving, tracking and analytics platform and global network of sites and applications (many exclusive) deliver superior results.

Leading companies including P&G, Ford, NetFlix, Time Inc., Visa, Disney, NHL, Edmunds, CBS Interactive and Hachette Media partner with Quattro Wireless because the company has turned the art of engaging and converting mobile consumers into a repeatable science.

Let’s discuss both acquisitions in detail.

AdMob Acquisition

This is Google’s 3rd largest acquisition ever. Google announced it’s buying AdMob, a provider of mobile ad technologies, for $750 million in stock. This could give the relatively small market for ads on mobile devices a BIG PUSH.

With the acquisition Google gets better grip on Mobile industry with Android software already on increasing popularity such as with the Motorola’s Droid.

“Google could have built this itself, but this gives them a head start,” says mobile analyst Greg Sterling of Sterling Market Intelligence. “It will thrust Google into the forefront of mobile display ads.”

In particular, AdMob provides Google with the ability to serve display ads, the pictorial banners that are the chief revenue source for most Web sites, to cell phones and other mobile devices. Google last June introduced AdSense for Mobile in a bid to provide Web sites with display ads akin to its multibillion-dollar AdSense program for conventional Web sites.

Google said

“We got a chance to get an unbelievable engineering team,” Vic Gundotra, a Google vice president of engineering, said in an interview. Susan Wojcicki, Google’s vice president of product management, added that AdMob founder Omar Hamoui is “really a visionary in this space.”

Gizmo5 Acquisition

Last month Skype had it’s eyes on Gizmo5, a VOIP Startup. Gizmo5′s SIP infrastructure could theoretically replace Skype’s proprietary P2P back end, but the deal broke in the dark.

We know that it’s hard to get PirateBay down, or rather it’s impossible.

Now, just because the board has approved the purchase doesn’t mean that it will happen that easily. There continue to be questions about the company’s ability to raise money to complete the deal, and the Swedish government is investigating the company.

So does this change anything? Theoretically, maybe, but in reality, the Pirate Bay as it was once known is still gone, if it does come back it won’t be the same service, and users have already migrated out to other BitTorrent sites for their file sharing needs. What’s next?

PirateBay Clone Threatened with LegaAction

How does it Benefit Ericsson?

The deal will greatly expand Ericsson’s foothold in North America, bringing customer relationships with large operators such as Verizon and Sprint.

Nortel had been operating under court bankruptcy protection under Chapter 11 since January. In June, the company accepted a $650 million offer from Nokia Siemens Networks for its CDMA and LTE assets. That offer set the stage for Private equity firm MatlinPatterson to jump in with a counter offer of $725 million for the wireless assets.

RIM also made an offer for the assets but was barred from the sale after a bidding procedure dispute with Nortel.

Ericsson was a late entrant to the bidding process, with its interest publicly declared just Thursday. As part of deal, announced early Saturday, Ericsson will offer employment to a minimum of 2,500 Nortel employees supporting the CDMA and LTE Access business.

“This is one of those gifts from heaven for Ericsson in the otherwise very competitive world these companies operate in. Rather than competing with Nortel, Ericsson has won,” said telecom industry analyst Jeff Kagan in e-mail. The consolidation of the industry, however, is not necessarily a good thing for customers”, he noted.

“There are other competitors today, however Nortel posed a large competitive threat to Ericsson, and without that dynamic, what will the affect be on pricing and innovation and customer responsiveness?”

Ericsson and Nortel officials tend to reassure customers, with the statement:

“The anticipated sale of our CDMA business and LTE Access assets to Ericsson for $1.13 billion represents a very positive prospect for our customers who will be able to continue their relationships with a long term partner; for employees who will have new opportunities at Ericsson and for many of our other stakeholders,” said Nortel President and Chief Executive Officer Mike Zafirovski, in a statement announcing the deal at the official Nortel website.

Ericcson CEO Carl-Henric Svanberg added,

“Ericsson is committed to meeting the needs of our new CDMA customers today and bringing the next generation of mobile broadband to the world with LTE.”

Nortel said that it expects to close the deal by the end of the year.

GoldenGate is a provider of real-time integration software. Information Software giant Oracle is buying Silicon Valley real-time data firm GoldenGate Software, for an undisclosed sum.

“With the addition of GoldenGate, Oracle expects to help our customers achieve better performance, through improved business intelligence and business continuity with real-time information,” said Oracle’s senior veep Hasan Rizvi, in a statement. “The combination of GoldenGate and Oracle is expected to create a comprehensive heterogeneous data integration platform.”

The two companies have been close business partners for more than 10 years.

Oracle said the deal, subject to the normal regulatory approvals, was expected to close later this year. In the meantime, the two software firms will operate independently.

The acquisition-happy software maker, which is also is in transition to buy Sun Microsystems for $7.4bn, hopes the merger will “create a comprehensive heterogeneous data integration platform.”

Although the announcement was absent financial details, The Wall Street Journal linked to a blog post by research company 451 Group, which predicted the acquisition and estimated that GoldenGate took in about $100 million in revenue over the last year.

From the official news:

Oracle announced it has agreed to acquire GoldenGate, a leading provider of real-time data integration solutions. GoldenGate’s best-in-class solutions enable real-time data integration and management by capturing and delivering updates of critical information as the changes occur and providing continuous synchronized data across heterogeneous environments. Companies are expected to gain improved business intelligence across the enterprise, with more accurate and timely analysis of real-time business performance.

GoldenGate’s complementary product accelerates Oracle’s product strategy to manage real-time data integration through a comprehensive data integration platform. This combination is expected to deliver the fastest and most scalable real-time data integration solution for customers.

Generally speaking, operating costs tend to be cheaper in a recession. Talent is easier to find because of widespread layoffs and dissatisfaction. It’s easier to find a more talented resource relatively at a lower cost. The competition is usually less fierce because, frankly, many players are taken out of the game.

Recessions can also help executives figure out how to improve products, services, and processes internally and for customers. Ideally, the creative thinking that’s needed to weather the storm of an economic downturn can lead to new markets and revenue streams. “Innovation originates from challenges,” says Vineet Nayar, CEO of HCL Technologies, a Noida (India)-based global IT services company.

HCL recently partnered with Xerox (XRX) to provide tech support for corporate customers using Xerox systems meant to reduce the amount of wasted paper. The systems themselves were inspired by the dual challenges of helping to save the environment and the need to slash office expenses during the downturn.

Inventing cost-effective and time-saving processes becomes a priority in a downturn, and it’s an area of interest for companies and organizations in a variety of fields, from high tech to health care. “In a recession, you can innovate to be more efficient,” says John Kao, author of the book Innovation Nation and the head of Deloitte’s Institute for Large Scale Innovation.

Mergers/Acquisitions

Recession is the time when major of the Mergers and Acquisitions are triggered. Though multi-billionaire companies can go bankrupt in months, there are always new owners to overhaul the system. The Fall of Sun Microsystems, Nortel are the best examples. Though they fall for bad, Innovation-driven Big Fish eats them and keep them in a more safer zone.

Mergers are driven by effectiveness of cost at which they can be done. Recession is the best time, the market being down, a good bargain is available to the bidder, no matter what is the financial state of the company on radar.
Lessons to Be Learned

Some companies are always left Recession-resistant. Best example is for Apple. Apple reported quarterly profits jumped 15%. With sky high sales for Mac, iPhone, Apple once again proved the key to survive in recession is Innovation. Innovation at technology, flashy gadgets, quality, and rumors among it’s fans .

Smart companies will continue to apply the innovation lessons learned during today’s tough times even when things pick up. The innovative processes, products, and services that hatch now can help executives understand how to curb costs or take risks on fresh ideas when the economy rebounds.

Innovation is all about, how companies are finding creative ways to come up with new products and services faster and more efficiently—with fewer resources. Industry has to look at the current recession through a variety of lenses to rethink how to approach innovation tactics even as R&D budgets have been slashed. Smart companies are finding inventive ways of keeping employees motivated and creative even when morale is low. We need to look into the benefits of outsourcing innovation in areas ranging from industrial design to corporate strategy.

All these strategies help us to prove that there’s light at the end of the tunnel.

Sun Microsystem’s shareholders, today, approved its proposed purchase by Oracle. Though it came wiht a shocking surprise underneath. CEO Jonathan Schwartz nor Chairman Scott McNealy, two of the most outspoken and visible executives, didn’t attend the meeting. It was said that Schwartz was ill and there was no information about Scott.

The meeting was run by two non-leading executives, Mike Dillon, Sun’s executive VP and General counsel, and Craig Norris, VP of corporate law.

Schwartz, once a pro blogger, hasn’t posted since May 18th. What went wrong?. Though both

Schwartz and McNealy appeared at Sun’s JavaOne conference last month, they haven’t said much publicly about the deal since a tightly scripted teleconference on April 20 that announced the transaction. (McNealy deferred to Oracle CEO Larry Ellison to do most of the talking about the transaction at JavaOne).

Sun did not conduct a conference along with its financial results for the quarter ending in March because they could foresee bigger than expected loss for the Quarter that ended in June.

SDTimes blog posted an Emotional view of what happened over the meeting::

The whole event took less than 10 minutes. And when it was over, most folks quietly funneled out of the room, looking vaguely dejected.

This was the last real day of Sun’s existence. The acquisition itself has already happened: It is backdated to April 19 and June 5. The vote today changed history, slightly, effectively giving Oracle power over Sun since this past spring.

… Make no mistake about it: This was the end. Such an ending it was, as Schwartz andd McNealy couldn’t bring themselves to show their faces. They know what is going to happen to this company, and I expect they both feel guilty and responsible for the result. How could you not feel responsible after presiding over almost 10 years of declining revenues and profits? …

But the shrinkage that is yet to come is far greater. Analysts are expecting a 33% cut in

headcount at Sun, and I think that’s conservative. Oracle expects to make more money on this deal than it did on its deals with BEA and PeopleSoft combined.

And that is why Schwartz isn’t here, I believe. Because he genuinely loved Sun and its employees. And because he can’t stand to look them in the eye knowing that most of them are about to lose their jobs.

The last line said almost everything. The hard earned company’s success was declining over the last few years which led Sun to take this step, which is ofcourse a good decision. If this woudn’t have been the case, we might have not waited long to see the Sun burning down to a cold black ball rather than a graceful Sunset that we saw today.

So it seems that Sun’s final days will continue to play out very quietly. Still, in view of how loudly Schartz and McNealy used to trumpet their views–and harsh comments to this and other blogs about their actions and severance packages–some public comments by the two men might have been welcomed by employees and shareholders.

Oracle, the industry’s leading innovator, has continued their buy out strategy for the good of the brand and the Industry. Larry Ellison is a smart and mature Entrepreneur, definitely I can trust in his visions which would take the most powerful Developer platform (JAVA), the Best open source Database(MYSQL), Most Innovative/flexible Server platform (Solaris + Sun SPARC) to the next level.

Sun Chairman Scott McNealy (left) with Oracle chief Larry Ellison.

With the move- valued at $7.4 billion including Sun’s debt – Oracle also becomes a full-fledged hardware player. Oracle has been dabbling with the storage appliance with HP, but the acquisition of Sun puts the company in an entirely different realm. Oracle and Sun have been long-time partners.

On a conference call with analysts, Ellison said that Oracle’s acquisitions to date have been market leaders – PeopleSoft, Hyperion and Siebel. With Sun, Oracle said Java and Solaris are the keepers in the deal.

“More Oracle databases run on the Solaris Sparc than any other system,” said Ellison, noting Linux was second. “We’ll engineer the Oracle database and Solaris operating system together. With Sun we can make all components of the IT stack integrated and work well.”

Regarding Java, Ellison said it wanted Sun so it could own the building blocks for its middleware.  Oracle’s middleware is built on Java and the applications giant said it will continue to invest in the software.

Ellison said in a statement:

“The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems. Oracle will be the only company that can engineer an integrated system – applications to disk – where all the pieces fit and work together so customers do not have to do it themselves. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up.”

That pitch sort of sounds like Apple’s approach on the consumer side. Apple’s strategy is to integrate hardware and software to make things easy. Oracle with Sun appears to be the Apple of the enterprise. Indeed, Oracle President Charles Phillips noted that the company is looking to offer everything from apps to the disk.

The data center gets (more) interesting

It’s clear that Oracle is targeting the next generation data center—as is the rest of the industry. Here’s the list of tech titans looking to remake the data center:

• IBM;
• HP;
• Cisco;
• Dell;
• Oracle;
• And a bevy of other players—Juniper, EMC, VMware—from various angles.

The technical side of this Oracle-Sun deal also is notable. Oracle’s stack of IT stuff now includes:

• Java;
• Solaris;
• Enterprise applications ranging from CRM to ERP to business intelligence;
• The database (Oracle and MySQL);
• The middleware;
• The storage hardware;
• Cloud computing services;
• And servers.

Oracle’s initial game plan is to focus on existing joint customers. That base represents a large data center pie. My hunch is that Ellison saw the possibilities of integrating hardware and software with Oracle’s Exadata database machine. Ellison boasted that the Exadata machine has seen strong demand on Oracle’s earnings conference call.

In the end, Oracle’s acquisition of Sun won’t change the company’s overall game plan: Offer the customer a lot of product—apps, languages, middleware, databases—lock that enterprise in and collect the dough.

The art of war

So what does Oracle really want with Sun?

If you subscribe to the art of war approach to the tech sector, Ellison’s move to buy Sun makes a lot of sense. To wit:

• Oracle gets to annoy IBM—and own Java—over a few pennies a share more than Big Blue was willing to pay.
• Oracle gets to kill MySQL. There’s no way Ellison will let that open source database mess with the margins of his database. MySQL at best will wither from neglect. In any case, MySQL is MyToast.
• Sun has a big installed base. All the better to upsell applications into.
• Oracle’s database runs on Solaris systems. Oracle fine tunes the systems, charges a premium and ditches the low-margin hardware.
• And speaking of hardware. Sun’s manufacturing is outsourced so there isn’t a lot of baggage—real estate, equipment and labor—to worry about. If Oracle decides to milk then wind down the hardware business it’s relatively easy.

Making Sun more efficient

As with Oracle’s other acquisitions, Ellison plans to make its target more efficient and squeeze better profits. Oracle said the Sun deal will add at least 15 cents a share in non-GAAP earnings in the first year of the deal closing. That equates to $1.5 billion in Oracle’s non-GAAP earnings. Oracle president Safra Catz said the Sun deal will “be more profitable in per share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft and Siebel combined.”

Catz said Oracle will fund the Sun purchase with a mix of cash and debt. Catz added that Oracle will “run Sun at substantially higher margins.”

That statement is pretty heady given that Sun is losing money

For Sun, Oracle provides an exit from troubled negotiations with IBM. Big Blue was interested in Sun but bailed when the two sides couldn’t agree on price. Oracle stepped up and was willing to pay the $9.50 a share Sun wanted. Meanwhile, regulatory concerns won’t be much of an issue since Oracle hasn’t been a hardware player—until now.

In addition, Oracle saves Sun management from what could have been a complete debacle following the IBM takeover talks. The Sun board had been split on the IBM deal. Today, it’s all roses. Sun Chairman Scott McNealy said the Oracle-Sun marriage was a “natural evolution” and noted he was “thrilled” about the deal. Sun CEO Jonathan Schwartz added that the Oracle takeover will advance innovation in the marketplace.

It’s needless to say, but Sun’s board approved the Oracle purchase unanimously. The deal is expected to close in the summer.

The agreement with Oracle came about two weeks after I.B.M. ended its talks with Sun. The Sun board balked at that deal after I.B.M. lowered its offer to $9.40 a share from $10. Still, Monday’s deal represented a 42 percent premium over Sun’s closing price of $6.69 on Friday.

Oracle and Sun said in a statement that net of Sun’s cash and debt, the deal was valued at $5.6 billion.

Lawrence J. Ellison, Oracle’s co-founder and chief executive, and Scott G. McNealy, Sun’s co-founder and chairman, have been two of Silicon Valley’s closest allies over the last 20 years. Their companies turned into two of the superstars of the Internet build out, and both executives made ribbing their rival Microsoft a favored pastime.

Historically, most of Oracle’s database sales have occurred in tandem with Sun’s servers. Over the last few years, however, Oracle has moved to make Hewlett-Packard and Dell stronger allies, as Sun’s business has declined.

“This combination is a natural evolution of our relationship and will be an industry-defining event,” Mr. McNealy said.

Sun’s directors have unanimously approved the transaction. It is anticipated to close this summer, subject to Sun stockholder approval, the companies said in a statement.

Oracle said it expected the purchase to add at least 15 cents a share to its adjusted earnings in the first year after the deal closes. The company also estimated that Sun would contribute more than $1.5 billion to Oracle’s adjusted profit in the first year and more than $2 billion in the second year.

Sun shares were up 36 percent, to $9.10, in early trading, while Oracle fell 5.6 percent, to $17.99.

The deal immediately disrupts the traditional relationships formed between some of the technology industry’s largest players and thrusts Oracle into the hardware business.

Oracle, for example, has long-standing partnerships with Sun’s rivals, including Hewlett-Packard and Dell. These sellers of server computers work to fine tune Oracle’s database and business software for their computers.

I.B.M., which competes against Oracle in the software market, also comes under new threats with the deal.

For years, I.B.M. has used its homemade servers as leverage for selling higher-profit database and business software. With Sun, Oracle opens up the same opportunity and gains access to thousands of existing Sun customers.

In addition, Oracle has now obtained the MySQL database, which Sun acquired last year for $1 billion. The open-source software has proved popular with companies looking to expand their Internet operations.

Last year, Oracle began a flirtation with the hardware market. It started reselling a server computer from H.P. that relied on its software for managing and analyzing large volumes of data.