Sun Microsystems has made a bid to tap into the burgeoning market for providing services to web 2.0 companies like Facebook by buying MySQL, a provider of enterprise software.
The California-based server and software firm will pay $1 billion for MySQL, a maker of database management software that social networks like Facebook rely upon to deliver services to their vast numbers of subscribers.
MySQL controls 50 per cent of the $15 billion market for so-called 'open source databases', and its clients include Google, YouTube, Facebook, Flickr, the photo-sharing site, and Baidu, the fast-growing Chinese search engine.
Under the terms of the deal, Sun will pay $800 million in cash for the entirety of MySQL's stock, and will also assume $200 million worth of options.
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The acquisition, which is subject to regulatory approval, is expected to close in the middle of the year, Sun said.
Separately, Sun said it expected its profit in the second fiscal quarter to be in the range of $230 to $265 million - or 28 to 32 cents a share - on an adjusted basis, up from $133 million, or 15 cents a share - for the same period a year ago.
Sun shares were down 2 per cent - to $57.82 - in morning trading.
MySQL is one of the leading providers of database software, which is needed to manage the vast pools of personal and other information that are collected by social networks, search engines and other internet companies.
In particular, it makes open source database software, which makes up a relatively small proportion over the overall database software market, but is becoming increasingly popular among because of the flexibility it gives companies to customise their databases.
The acquisition is the largest acquisition for Jonathan Scwhartz, Sun's chief executive, who took over running the company in 2006 and has consistently put the provision of hardware and sofware services to web-based companies at the heart of Sun's stratetgy.
"MySQL is the fastest growing entrant in the database software marke - they're prolific," Mr Schwartz said in an interview with Times Online. "The growth in the open source database market is in double digits, whereas the rest of the market is flat to down."
He added that there would be strong opportunity to integrate MySQL with Sun's own products, which include the servers that power giant databases like Google's.
Companies such as MySQL don't charge for their database software, which is made freely available to clients, but instead generate revenue by providing maintenance, updates, and other support services.
Sun's backing of MySQL would provide a major flip to the open source database market, analysts said, because larger companies which have traditionally been wary of small providers like MySQL could feel confident that support infrastructures were starting to be put in place.
"This is going to be a real wake-up call for traditional database management sofware companies, which don't take open source particularly seriously," DonaldFeinberg, a vice president at Gartner, said. "It is a potentially landscape-changing situation for the market."
