June 8, 2021

Sun Microsystems Inc. plans to buy open-source software maker MySQL AB for $1 billion, beefing up the server maker’s database offerings with a company whose technology is used by some of the world’s biggest Web sites.

Sun, in a separate announcement before the market opened, said its second quarter revenue would narrowly exceed Wall Street estimates. It also said profit would fall at the high end of analysts’ expectations. The company revealed its preliminary results ahead of schedule.

Santa Clara-based Sun is paying $800 million in cash and assuming $200 million in options to acquire MySQL. The Swedish company makes open-source database software used by companies such as online search leader Google Inc., popular Internet hangout Facebook Inc. and Finnish phone maker Nokia Corp.

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 Corp. and Dell Inc.

Sun has tied its fortunes to open-source software. It believes 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 non-open-source offerings from Microsoft Corp. and Oracle Corp., 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, Schwartz said.

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

The acquisition, expected to close in the third or fourth quarter, takes pressure off Sun to spend some of the cash it’s been accumulating. It also bolsters its software offerings with a well-known known name in Internet data retrieval.

“This gives us access to every hot Web company on earth, and every company that will be hot 5 years from now,” Schwartz said. “For us, this is completely landscape-changing.”

Sun also said it expects net income of between $230 million to $265 million, or 28 cents to 32 cents per share. Analysts surveyed by Thomson Financial were expecting profit of between 22 cents and 38 cents.

Sun predicts $3.6 billion in sales during the second quarter. Analysts were expecting, on average, $3.58 billion in sales.

The company was expected to release its results January 24.

Despite financial difficulties that have plagued Sun since the dot-com meltdown in 2001, the company has been accumulating a cash horde that reached $5.9 billion at the end of the 2007 fiscal year.

In recent quarters, as Sun has returned to profitability under new management and tightened cost controls, investors have pressured the company to spend some of its war chest in ways that boost its value.

Still, some shareholders remain skeptical about the company’s prospects.

Sun’s stock price has slid about 25 percent since the company’s 1-for-4 reverse stock split in November, an essentially cosmetic maneuver to remove the stigma of slumping shares.

In a reverse stock split, a company lowers the number of outstanding shares, boosting the value of each share, while keeping total market value unchanged.

As a result, Sun’s share price jumped from around $5 to more than $20, but has fallen sharply since then, closing Tuesday at $14.98 before the acquisition and results were announced.

Sun shares rose 76 cents, or more than 5 percent, to $15.74 early Wednesday.