Just before the economy slips into a recession, and at the peak of M&A market valuations, Sun Microsystems announced plans to buy open source database software maker MySQL for roughly $1 billion, or $800 million in cash and $200 million in options.
It's a plump number under any circumstance, and it's especially rich given MySQL's profits may be paltry. Sun says more than 100 million copies of MySQL's open source database software have been downloaded and distributed, and 50,000 copies are downloaded daily. That doesn't necessarily translate into a fat bottom line, though. One analyst thinks MySQL's annual revenue may come in at $70 million to $85 million.
"Less than 1 percent of MySQL users pay," wrote Global Equities Research analyst Trip Chowdhry. "Users are in the habit of getting free stuff and it's impossible to break the habit. . . We don't see Sun (being) able to monetize it."
It's a big move for Sun, which, flush with cash, announced last year a $3 billion stock buyback plan in an effort to jack up the share price. (The company spent $1.25 billion buying back 244.6 million shares as of Sept. 30, 2007.)
Although all the details of the deal have yet to be ironed out, Sun says MySQL will be integrated into its Software, Sales and Service organizations. MySQL CEO Marten Mickos (pictured above) will join the company's "executive leadership team." It's not clear whether any of MySQL's 400 employees will get cut, though. Last year Sun announced 4,000 to 5,000 job cuts, or 11 percent to 13 percent of its workforce.
Over the last three years, Sun has spent at least $4.5 billion on acquisitions including a $4.1 billion purchase of StorageTek, a $387 million purchase of software company SeeBeyond; and the $25 million acquisition of Tarantella.
For more on the MySQL acquisition and MySQL's importance within the web developer world, see Scott Gilbertson's analysis of the MySQL acquisition on Compiler.
UPDATE: Sun spokeswoman Dana Lengkeek says that Sun plans to keep most of MySQL employees, about 70 percent of which work from home.
Photo: MySQL
