The forthcoming $7.4 billion purchase of Sun Microsystems Inc. by Oracle Corp., a deal that was disclosed yesterday, could mean big changes and possible job cuts for the approximately 2,600 workers employed by the two companies in Massachusetts.
"If I were employed there, I would be getting my resume ready, considering what Oracle has done in the past," said Tom Davenport, professor of information technology and management at Babson College in Wellesley. "They're pretty brutal about cutting people loose."
Neither company would discuss the employment implications of the deal. Oracle has not revealed the number of jobs it has cut during a spate of acquisitions over the past four years. But the company's financial filings with the Securities and Exchange Commission reveal that it often sets aside large amounts of money to cover severance expenses when it acquires other companies. For example, last year, Oracle set aside $111 million in restructuring costs after its $8.6 billion acquisition of BEA Systems Inc. in April. Oracle said the money was mostly for severance payments to laid-off workers.
John Challenger, chief executive of Challenger, Gray & Christmas Inc., a Chicago job placement agency, predicted that Oracle will hang on to Sun's scientists and engineers. "They'll probably want that programming talent, the expertise in the systems that Sun brings," said Challenger. However, Challenger said that administrative and sales jobs made redundant by the merger are likely to be cut.
Apart from the merger, Sun in November said it would cut 6,000 of its 33,000 worldwide payroll. Those cuts are still ongoing.
Greg Bialecki, Massachusetts secretary of housing and economic development, predicted Oracle will want to continue Sun's research and development efforts in the state. "Sun is doing some of their more innovative work in their Massachusetts offices," Bialecki said, adding the state will benefit if the merged company is stronger, even if some jobs are lost.
Both Sun and Oracle maintain sizable operations in Massachusetts. Neither company would provide up-to-date personnel numbers, but as of 2007, Sun employed 1,750 workers in Massachusetts, many of them in a large facility in Burlington. As of last year, Oracle, which also runs a large facility in Burlington, employed about 850 people in Massachusetts. Last August, Oracle said it would build a 150,000-square-foot building at its Burlington site.
Oracle's acquisition of Sun is certain to create a new computing giant capable of challenging industry leaders like Hewlett-Packard Co., and IBM Corp., which last month failed in its bid to buy Sun for about $7 billion. Oracle will use a combination of cash and borrowed money to pay for the purchase, which will cost Oracle $5.6 billion after taking into account Sun's debt and cash holdings. Oracle predicted the merger will increase its annual operating income by $1.5 billion and add at least 15 cents per share to net income in its first year.
Oracle is a software and services company, best known for advanced database management software used by many of the world's largest enterprises. Sun produces both hardware and software. It produces Solaris, a popular version of the Unix operating system. Sun is also the creator of Java, a software language and development system that runs on hundreds of millions of devices, ranging from mainframe computers to cellphones. Sun makes server computers that use its own Sparc processor chips, but also makes machines that run processors from Intel Corp. In addition, Sun makes data storage gear, competing against HP and EMC Corp. of Hopkinton.
Sun boomed during the Internet gold rush of the 1990s, but the company's fortunes never fully recovered when the technology bubble deflated around 2001. The company has been profitable in only one of its past four quarters, losing a total of $1.8 billion during the period. "They were trying to portray themselves as a big enterprise player in the marketplace, and they were not big enough to play that role," said Judith Hurwitz, president of the technology consulting firm Hurwitz & Associates in Newton.
Yesterday, Oracle chief executive Larry Ellison said the Sun acquisition would help his company secure a leading role in the making of "middleware" programs that link databases with a variety of business and consumer applications. "As a result of this acquisition, Oracle can increase the investment in Java technology that is so critical to our continued success in middleware," Ellison said.
He also said Sun's Sparc computers running Solaris Unix are already the most popular platform among Oracle's database customers. Ellison said engineers at the merged company would be able to redesign their hardware and software to make them work together more efficiently than before.
Shares of Oracle stock closed down 24 cents at $18.82 yesterday, while Sun Microsystems stock rose $2.46 to $9.15, both on the Nasdaq stock exchange.
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