Sun Microsystems case facts.docx - Sun Microsystems Case...

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Sun Microsystems Case Facts: Oracle, a California-based business software company, was one of the world’s largest and most reputable sellers of database management systems and other related software. With $23.6 billion in annual revenue, the company was a leviathan, led for- ward with lightning speed by the only CEO Oracle had ever had, Larry Ellison. Sun was nothing to scoff at either. Once the darling of Silicon Valley, it had fallen on tough times but was still competitive. Sun had started as a hardware and servers producer, but over the years, it had established a solid position in the software industry with its Java programming language, Solaris operating system, and MySQL database management software. Combining these two companies had the potential to create the Wal-Mart of the enterprise software industry. Ellison “had a vision for creating an end-to-end vendor clients go to for all their technology” needs. Oracle had been on a successful shopping spree over the past several years. The ability to acquire 10% margin companies and turn them into 40% margin companies had distinguished Ellison and his team as ruthless cost-cutters who planned ahead well before making purchases. As a member of the corporate development team, Madison knew that better than anyone else. She had spent the last few weeks carefully poring over every part of Sun’s financials, business lines, R&D figures, and personnel expenditures. Today was a break from the 20-hour work days, the sight of empty Chinese food cartons, documents strewn across the table, and weary-eyed bankers. Today had been a better day, but only delivered brief respite to the team. Competitive Landscape: The computer hardware market consisted of personal computers (PCs) (roughly half of sales), servers, mainframes, and workstations (Although customer loyalty was relatively low, brand awareness was high, which somewhat restricted new entry into the market. Business customers were typically tied to specific hardware manufacturers through long- term contracts, which led to significant switching costs. Individuals were less fettered and had minimal switching costs, but only represented a small percentage of the market. Computer hardware was a necessity for individuals and businesses alike, making demand strong and consistent. With weak rivalry among players, the market had enjoyed a healthy 4.8% growth over the previous few years and was expected to grow at the same pace until 2013.

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