The news at a glance
Oracle: Database giant buys a struggling rival; Banking: Bank of America’s profit surprise; Consumer goods: PepsiCo grabs two bottlers; Real estate: Big mall developer goes bust; Earnings: GE’s profits tumble
Oracle: Database giant buys a struggling rivalOracle has acquired Sun Microsystems for $7.4 billion, two weeks after IBM opted not to buy the struggling tech company, said Jonathan Skillings in CNET.com. Oracle will pay $9.50 a share for Sun, a 42 percent premium over Sun’s share price of $6.69 just before the deal was announced. “Sun made its name as a supplier of hardware during its dot-com heyday, but its best-known technology is software: the Java programming language.” Oracle says that Sun will add $2 billion to its profits within two years.
Sun’s expertise in high-end file servers makes Oracle a formidable competitor, said Ashlee Vance in The New York Times. Oracle is best known for its database programs, which organize vast amounts of corporate information. And “historically, most of Oracle’s database sales have occurred in tandem with Sun’s servers,” which are fine-tuned to work with Oracle’s software. By joining hardware and software under one roof, Oracle is directly challenging IBM, which uses its own servers “as leverage for selling higher-profit database and business software.”
Banking: Bank of America’s profit surpriseBank of America this week beat expectations and reported earning a $2.81 billion profit in the first quarter of 2009, said Ieva Augstums in the Associated Press. That’s up from $1.02 billion a year ago. CEO Ken Lewis, who has been “up against intense pressure this year” over the bank’s purchase of Merrill Lynch and subprime lender Countrywide Financial, pointedly noted that both acquisitions contributed to BofA’s strong quarter. But the bank also wrote off $13.4 billion in bad debts, suggesting more credit problems ahead.
Consumer goods: PepsiCo grabs two bottlersSoft-drink and snack giant PepsiCo has agreed to buy its two largest bottlers for $6 billion, said Marketwatch.com. Pepsi will pay a 17 percent premium over the previous closing prices of both companies, Pepsi Bottling Group and PepsiAmericas. The deal, “a major strategic shift” for Pepsi, “will allow it to gain far more control over distribution and better leverage as consumers shift away from carbonated soft drinks to juices, teas, and bottled water.”
Real estate: Big mall developer goes bustGeneral Growth, the nation’s second largest shopping-mall developer and “a barometer for the troubles bedeviling the American retail market,” has filed for Chapter 11 bankruptcy protection, said Michael de la Merced in The New York Times. The filing came after the collapse of months-long debt-renegotiation talks between General Growth and its biggest creditors. General Growth had built up debts of more than $25 billion during a growth spurt that climaxed with the $12.6 billion acquisition of Rouse Co. in 2004.
Earnings: GE’s profits tumbleGeneral Electric posted a first-quarter profit of $2.9 billion, down 35 percent from a year earlier, said Christopher Hinton in Marketwatch.com. Nonetheless, GE’s net income, which works out to 26 cents per share, was higher than analysts’ expectations of 22 cents per share. The company’s financial unit, GE Capital, lost $153 million during the quarter, mostly as a result of loan losses. GE Capital, the world’s biggest nonbank lender, “remains the focus of investor scrutiny as write-downs on consumer and commercial loan delinquencies increase.”