Transcript Slide 1

• Nick Zhao
Chief Executive Officer
• Denizhan Duran
Chief Operating Officer
• Meric Akkan
Financial Analyst
Agenda
 Introduction to Oracle
Corporation
 Our Vision and
Strategies
 Overview of Recent
Acquisition of Sun
Microsystems
Oracle Corporation Overview
 World’s largest business
software company
 $23.3 billion in revenue,
FY09
 345,000 customers
worldwide
 21,000 partners
worldwide
 Operating in 145
Countries
 85,000 employees
Solutions Offerings
 Oracle Database
•
•
•
•
#1 Database
#1 Data Warehouse
#1 Database on Linux
#1 embedded database
 Oracle Fusion Middleware
•
•
•
•
#1 middleware
#1 application platform suites
#1 enterprise performance management
#1 enterprise project portfolio management
 Oracle Applications
• #1 customer relationship management applications
• #1 human capital management applications
Information Powers Profitability
 Oracle Services
• Consulting and Support
 Oracle Industry Solutions
• #1 in banking, communications, financial services,
public sector, retail
 Oracle Accelerated Solutions
• -Provide midsize companies solutions for high growth
 Technology Leadership
• Leader in software industry
• 12% of revenue on R&D
Financial Snapshot
 Total Revenue: 23.3 billion,
 Net Income: $5.59 billion
 Sales growth of 3.7%
 ROE: 22.27%
 ROA: 11.18%
 Margins:
• Gross: 79.38
• Operating: 36.79
• Net: 24.05
Operating Principles
Simplify: Speed information delivery with
integrated systems and a single database.
Standardize: Reduce cost and
maintenance cycles with open, easily
available components.
Automate: Improve operational efficiency
with technology and best practices.
Expansion through Acquisition
 Goals: Diversity and Integration
• Obtain a customer base that increases market share and revenue.
• Buy into a new product line that fills a market gap
• Technology deals that improve a core capability
 Over forty acquisitions in a wide range of industries in the last five years
 Oracle to acquire Sun Microsystems
• Approx. $7.4 billion in equity value; $5.6 billion net
cash and debt
 Sun Microsystems:
• Leading provider of standards-based computing
infrastructure
• $13 billion revenues
• Operating in 160 countries
• 47,000 enterprise customers
 Combination of best-in-class enterprise software
and mission-critical computing systems
Strategic Importance
 Provides complete, open and integrated systems
 Sun’s product assets will provide long term
customer advantages
 Customer-driven acquisition
• Reduces complexity, risk and costs
 Expands range of products
 Industry Changing Event
• Together Oracle and Sun delivers complete, open and
integrated products from applications to disk
Customer and Shareholder
Benefits
Customers:
• Increased R&D
• More complete and integrated line of products
• Reduces integration costs with improved
performance, reliability and security
• One stop shop for enterprise computing
Shareholders:
• Increased Share Price
• High projected value of firm after merger
• Nick Zhao
Chief Executive Officer
• Denizhan Duran
Chief Operating Officer
• Meric Akkan
Financial Analyst
Agenda
Oracle: Main Products
Oracle: Growth and Turnover Rates
Sun Microsystems: Overview
Merger Benefits
Sun Products and Oracle
Recent Merger News/Expectations
Oracle: Main Products
 Oracle Database 11g
 Oracle Fusion Middleware 11g
 Other Applications, including:
• Oracle Enterprise Manager
• Over 50 industry-specific companies acquired
• Ranging in services such as financial/operational
infrastructure, spreadsheet suites, mobile applications,
real time collaboration, billing and supply chain
management.
Oracle Database 11g
 Latest version of our leading relational database
management software
 Consolidating business applications onto reliable
low cost database grids (Real Application
Clusters)
• RAC is the foundation for grid computing, which
allows multiple applications to share the same
computing infrastructure, resulting in much greater
flexibility, cost and power efficiency.
• Oracle offers the most complete and field-proven
portfolio of industry leading grid computing
solutions. More than 15,000 companies have
implemented RAC.
Oracle Database 11g
 Maximizing availability, eliminating idle data
center redundancy
• Protection from server failure, guard against data
failure, upgrades with zero downtime: very reliable.
 Compressing data onto low cost storage
partitions for faster performance
• Advanced Compression lowers storage costs,
reduces disk space requirements, improves
application performance, creates cost-efficient
storage.
 Complete, integrated, secure
Comparative Advantages
 World records set on price/performance
benchmarks: outperforming best IBM results by
more than three times, distinguishing Oracle
Database in demanding enterprise application
environments.
 #1 in grid computing/application servers for grid.
 Clients save 41% in database administrator
costs compared to Microsoft SQL Server 2008
 48.9% market share, holding more market share
than six closest competitors combined
Oracle Fusion Middleware 11g
 Fastest growing aspect of our business
 #1 application infrastructure foundation
 Unique software for the development, deployment and
management of service-oriented architecture
• Hot-pluggable architecture lets clients integrate various
Fusion Middleware products into their existing IT
environments
• Better use of applications/systems by IBM, SAP or
Microsoft
• 35 of the world’s 50 largest companies are Fusion
Middleware customers
• Including various components such as enterprise
application servers, integration and process managements,
business intelligence/systems management tools
Other Applications
Oracle Enterprise Manager
• an application management solutions tool which
increases efficiencies in IT environments
Over 50 acquired companies
• Most complete, open and integrated portfolio of
core business and industry applications,
architecture and infrastructure
• #1 in customer relationship, supply chain and
human capital management, as well as industry
leading support.
Sales Growth Rates
Oracle has consistently been the sales
growth leader among its main competitors,
SAP AG and IBM.
Asset Management Ratios
 Rapid growth experienced in this period has led
to decreasing turnover ratios
• Our operational turnover ratios will return to older
levels as our rapid growth is complemented by
stability.
 Increasing fixed asset turnover shows
investments paying off
Sun Microsystems - Overview
Multinational vendor of network
infrastructure products and open source
service solutions
• Software: Java platform, Solaris OS,
OpenOffice, MySQL
• Hardware: SPARC-based processors,
systems, storages and servers
Merger Benefits
 Merging with Sun will let us combine the best
enterprise software and mission-critical
computing hardware.
• Moving to the hardware market
• We will be the only company that can engineer an
integrated database system, from applications to disk,
where all the pieces fit and work together
• Becoming a complete systems vendor
• Increased R&D investment
• Driving open enterprise systems
• Reliable, efficient and secure Sun hardware
running Oracle software
Merger Benefits
 Increased value to customers
 Integration and management costs will go down
 Increased support services, more practical
 Investing in industry-specific areas; broader scope
 Oracle is number one provider in communications,
financial services and government sectors, whereas
Sun is the leader in energy, healthcare, life
sciences, media and environment fields
Java, Solaris and Oracle
 Oracle Fusion Middleware, our fastest growing
business, is built on Java language and software
• Ensured investment and innovation on Java
 Solaris OS is the leading platform for our largest
business, Oracle Database
• Having our own OS as well as Oracle Enterprise Linux
• Optimization for the high-end features of Solaris, as thousands of
our customers are running it
• Commitment to Linux and other open platforms to enhance our
strong industry partnerships; we will have the chance to develop
both Linux and its leading distribution geared towards database
servers
Sun Hardware and Oracle
Oracle and Sun have been partners for
more than twenty years
Developing x86 servers and storage
components
The Oracle Database on Sun SPARC runs
7.7 million transactions per minute
• New TPC-C world record, beating IBM’s
fastest computer which runs 6.1 million
transactions per minute.
Sun Oracle Database Machine
An example of the potential of a
partnership between Oracle and
Sun
The world’s fastest for any type
of database workload
Complete package of software,
servers, storage and networking
for all data management
Extreme performance for Data
Warehouses, OLTP Applications
and Mixed Workloads
Open Source, MySQL and Oracle
 Commitment to developing and supporting
open source
• Flexibility, choice and lower cost of computing
 Continue and develop the open source
MySQL database after the transaction closes
• Add to our existing suite of open source database
products, which includes Berkeley DB, an open
source storage engine
• MySQL already distributed as part of our
Enterprise Linux offering
Merger: Recent News
Announced on April 20, 2009
Approved by Sun stockholders on July 16,
2009
Approved by the US Department of Justice
on August 20, 2009
Pending regulatory approval in the
European Commission
The Merger and the EC
 EC’s statement: Oracle acquiring MySQL, an open
source database manager, could decrease
competition in the field.
 We believe this would not a competitive constraint
because of the technical differences
• Oracle Database is for large companies’ back
offices, MySQL is for web site developers/smaller
databases
• Two companies are not in the same market; no
switching between the two was observed
MySQL and Oracle
 MySQL will be a mean for us to access the lower-end
market
• Highest adoption rate, dynamic growth. 70,000
downloads a day
• Competition with Microsoft SQL Server Database
• We will invest on MySQL more than Sun is currently
investing on it, developing it and preserving its open
source status
Expectations
 We fully believe that the merger will go
through as is, with MySQL.
 EC expected to announce its final decision on
January 19, 2010, but there is a high chance
it will be announced earlier
• Since the only problem is MySQL, if the deal fails
to go through as is, we will acquire Sun without
MySQL
• Which would also be beneficial, as we will keep
profiting from their other technologies and
hardware.
We’re in it to win it. IBM, we’re looking
forward to competing with you in the
hardware business.
• Nick Zhao
Chief Executive Officer
• Denizhan Duran
Chief Operating Officer
• Meric Akkan
Financial Analyst
Financial Analysis
Financial Briefing on Oracle
Merger with Sun Microsystems
Comparison with the Competition
Income and Profitability Analysis
Cash Flow Analysis
Ratio Analysis
Discounted Cash Flow Analysis
Projection of Stock Price
Income Statement
In Million Dollars
Net Sales
Growth Rate %
Cost of goods sold
Gross profit
Selling and administrative expenses
Operating profit
Interest Expense
Earnings before income taxes
Income taxes
Net earnings
Basic earnings per common share
Diluted earnings per common share
$
$
$
$
Effective Tax Rate
Sustainable Growth Rate
Actual Growth Rate (Sales)
2009
23,252
3.66
4,794
18,458
9,903
8,555
630
7,750
2,241
5,593
1.10
1.09
$
$
$
$
28.92%
2009
22.19
3.66
2008
27.64
24.64
Rapid Growth since 2005
No sacrifice of profitability due to growth
Increased net earnings in turmoil of 2009
2007
26.77
25.15
2008
22,430
24.64
4,981
17,449
9,440
8,009
394
7,894
2,313
5,521
1.08
1.06
$
$
$
$
29.30%
2006
26.16
21.87
2007
17,996
25.15
4,191
13,805
7,672
6,133
343
5,986
1,712
4,274
0.83
0.81
28.60%
$
$
$
$
2006
14,380
21.87
3,235
11,145
6,187
4,958
169
4,851
1,429
3,381
0.65
0.64
29.46%
2005
30.65
16.18
$
$
$
$
2005
11,799
16.18
2,651
9,148
4,771
4,377
135
4,051
1,165
2,886
0.56
0.55
28.76%
Percent of Sales Income Statement
Net Sales
Cost of goods sold
Gross profit
Selling and administrative expenses
Operating profit
Interest Expens
Earnings before income taxes
Income taxes
Net earnings
Basic earnings per common share
Diluted earnings per common share
2009
100.00%
20.62%
79.38%
42.59%
36.79%
2.71%
33.33%
9.64%
24.05%
$
$
Effective Tax Rate
No sacrifices of profitability due to growth
Increasing EPS
1.10
1.09
28.92%
2008
100.00%
22.21%
77.79%
42.09%
35.71%
1.76%
35.19%
10.31%
24.61%
$
$
1.08
1.06
29.30%
2007
100.00%
23.29%
76.71%
42.63%
34.08%
1.91%
33.26%
9.51%
23.75%
$
$
0.83
0.81
28.60%
2006
100.00%
22.50%
77.50%
43.03%
34.48%
1.18%
33.73%
9.94%
23.51%
$
$
0.65
0.64
29.46%
2005
100.00%
22.47%
77.53%
40.44%
37.10%
1.14%
34.33%
9.87%
24.46%
$
$
0.56
0.55
28.76%
Oracle vs. SAP
2008
Net Sales
Cost of goods sold
Gross profit
Selling and administrative expenses
Operating profit
Interest Expense
Earnings before income taxes
Income taxes
Net earnings
Basic earnings per common share
Diluted earnings per common share
Average Number of Shares
Effective Tax Rate
Oracle
$ 22,430
4,981
17,449
9,440
8,009
394
7,894
2,313
$ 5,521
$
1.08
$
1.06
$
$
$
$
SAP
11,575
4,028
7,547
4,807
2,740
123
2,624
776
1,847
1.55
1.55
5,000
1,190
29.30%
29.57%
Oracle is clearly more profitable than SAP AG of Germany
Oracle
100.00%
22.21%
77.79%
42.09%
35.71%
1.76%
35.19%
10.31%
24.61%
SAP
100.00%
34.80%
65.20%
41.53%
23.67%
1.06%
22.67%
6.70%
15.96%
Cash Flows
Oracle
Cash From Operating Activities
Cash From Investing Activities
Cash From Financing Acitivities
2009
8,255
(2,599)
(4,923)
733
2008
7,402
(9,076)
3,718
2,044
2007
5,520
(4,971)
(990)
(441)
2006
4,541
(3,359)
1,583
2,765
2005
3,552
(5,753)
1,957
(244)
Sep 2009
2,362
(464)
(771)
1,127
2008
2,158
(3,769)
1,280
(331)
2007
1,932
(1,391)
(1,332)
(791)
2006
1,855
(132)
(1,388)
335
2005
1,607
(583)
(466)
558
Sep 2009
14,324
(4,235)
(13,493)
(3,404)
2008
18,812
(9,285)
(11,833)
(2,306)
2007
16,088
(4,675)
(4,740)
6,673
2006
15,006
(11,548)
(8,204)
(4,746)
2005
14,874
(4,423)
(7,147)
3,304
SAP
Cash From Operating Activities
Cash From Investing Activities
Cash From Financing Acitivities
IBM
Cash From Operating Activities
Cash From Investing Activities
Cash From Financing Acitivities
Oracle
generated $8.2
billion in cash in
2009
Big
investments in
2008
Downsized its
debt during
financial crises
Over $12 billion in cash and securities
Balance Sheet
In Million Dollars
Assets
Current Assets
Cash
Short-term Investments
Accounts receivable
Inventories
Other Current Assets
Total current assets
Gross Fixed Assets
Less Accumulated Depreciation
Net Fixed Assets
Other Assets
Total Assets
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable
Short Term Borrowings
Other Current Liablities
Total current liabilities
Long-Term Borrowings
Other Long-Term Liabilities
Total liabilities
Stockholders' Equity
Share Capital and APIC
Retained Earnings
Total stockholders' equity
Total Liabilities and Stockholders' Equity
High liquidity, no inventories
Most of Oracle’s capital comes from its retained earnings
2009
2008
2007
$ 8,995
3,629
4,430
1,527
18,581
3,826
1,904
1,922
26,913
$ 47,416
$ 8,262
2,781
5,127
1,933
18,103
3,640
1,952
1,688
27,477
$ 47,268
$ 6,218
802
4,074
1,789
12,883
3,459
1,856
1,603
20,086
$ 34,572
$
$
$
271
1,002
7,876
9,149
9,237
3,940
22,326
12,980
12,110
$ 25,090
$ 47,416
383
1,001
8,645
10,029
10,235
3,979
24,243
12,446
10,579
$ 23,025
$ 47,268
2009(%)
2008(%)
2007(%)
18.97%
7.65%
9.34%
17.48%
5.88%
10.85%
17.99%
2.32%
11.78%
3.22%
39.19%
8.07%
4.02%
4.05%
56.76%
100.00%
4.09%
38.30%
7.70%
4.13%
3.57%
58.13%
100.00%
5.17%
37.26%
10.01%
5.37%
4.64%
58.10%
100.00%
315
1,358
7,714
9,387
6,235
2,031
17,653
0.57%
2.11%
16.61%
19.30%
19.48%
8.31%
47.09%
0.81%
2.12%
18.29%
21.22%
21.65%
8.42%
51.29%
0.91%
3.93%
22.31%
27.15%
18.03%
5.87%
51.06%
10,293
6,626
$ 16,919
$ 34,572
27.37%
25.54%
52.91%
100.00%
26.33%
22.38%
48.71%
100.00%
29.77%
19.17%
48.94%
100.00%
In Million Dollars
Assets
Current Assets
Cash
Short-term Investments
Accounts receivable
Inventories
Other Current Assets
Total current assets
Gross Fixed Assets
Less Accumulated Depreciation
Net Fixed Assets
Other Assets
Total Assets
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable
Short Term Borrowings
Other Current Liablities
Total current liabilities
Long-Term Borrowings
Other Long-Term Liabilities
Total liabilities
Stockholders' Equity
Share Capital and APIC
Retained Earnings
Total stockholders' equity
Total Liabilities and Stockholders' Equity
Oracle
SAP
IBM
17.48%
5.88%
10.85%
0.00%
4.09%
38.30%
7.70%
4.13%
3.57%
58.13%
100.00%
9.19%
4.23%
22.50%
0.00%
4.16%
40.08%
23.16%
10.21%
12.95%
22.16%
100.00%
11.63%
0.15%
24.09%
2.47%
6.40%
44.74%
35.10%
22.04%
13.06%
27.37%
100.00%
0.81%
2.12%
18.29%
21.22%
21.65%
8.42%
51.29%
3.88%
18.44%
21.05%
43.37%
0.29%
4.67%
48.32%
6.40%
10.26%
22.08%
38.74%
20.72%
28.24%
87.70%
26.33%
22.38%
48.71%
100.00%
11.12%
40.54%
51.68%
100.00%
35.73%
-23.43%
12.30%
100.00%
Richest cash reserves
before the turmoil
Low accounts
receivable
Most Liquid of three
Secure capital structure
Longer maturities of debt
Ratio Analysis
Profitability
Gross Margin
Opeating Margin
Net Profit Margin
2009
79.38
36.79
24.05
2008
77.79
35.71
24.61
2007
76.61
34.08
23.75
2006
77.50
34.48
23.51
2005
77.53
37.10
24.46
ROA
ROE
ROIC
D. Earnings Per Share
P/E Ratio
11.81
22.27
17.12
1.09 $
14.40
13.49
27.75
19.94
1.06 $
18.27
13.44
27.62
19.90
0.81 $
19.78
13.60
26.32
20.47
0.64 $
17.78
17.26
33.17
27.29
0.55
18.82
FCF per share
Operating Cash Flow Margin
$
1.52
35.50%
1.39
33.00%
1.01
30.67%
0.83
31.58%
High and stable profit margins
Current P/E ratio of 19.91 shows the market trust on the company
Return ratios decreased due to financial turmoil, we expect them to
increase back to the old levels
0.65
30.10%
Oracle
Profit Margin
Asset Turnover
Assets/Equity
ROE
P/E
P/Sales
Ratio Analysis
2009
24.05
0.49
1.89
22.27
14.40
4.27
2008
24.61
0.55
2.05
27.75
18.27
5.23
2007
23.75
0.57
2.04
27.62
19.78
5.57
2006
23.51
0.58
1.93
26.32
17.78
5.14
2005
24.46
0.71
1.91
33.17
18.82
5.57
2008
11.90
0.9
8.13
87.07
9.42
1.10
2007
10.55
0.88
4.23
39.27
15.14
1.56
2006
10.38
0.87
3.62
32.69
16.03
1.63
2005
8.71
0.84
3.19
23.34
15.93
1.44
2008
15.96
0.96
1.94
29.72
16.28
2.59
2007
18.58
1.04
1.57
30.34
22.46
4.18
2006
19.92
1.01
1.55
31.18
26.38
5.27
2005
17.58
1.02
1.57
28.15
31.70
5.57
IBM
Profit Margin
Asset Turnover
Assets/Equity
ROE
P/E
P/Sales
SAP
Profit Margin
Asset Turnover
Assets/Equity
ROE
P/E
P/Sales
Oracle creates value through effective management of production
Oracle vs S&P 500
Consensus Recommendation by
Financial Times
This is the consensus forecast amongst 32 polled investment analysts. Most Analysts
have positive opinions of Oracle.
Analyst Detail
Buy Outperform Hold Underperform Sell No Opinion
Latest
12
12
8
0
0
0
4 weeks ago
11
12
8
0
0
0
2 months ago
11
12
8
0
0
0
3 months ago
10
12
8
0
0
0
Last year
12
8
7
0
0
0
Sun Microsystems
In Million Dollars
Net Sales
Cost of goods sold
Gross profit
Selling and administrative expenses
Operating profit
Net Non Opearting Losses (Gains)
Earnings before income taxes
Income taxes
Net earnings
Basic earnings per common share
Diluted earnings per common share
Effective Tax Rate
$
$
$
$
2009
11,449
6,718
4,731
5,109
(378)
1,805
(2,183)
51
(2,234)
(2.99)
(2.99)
-2.34%
$
$
$
$
2008
13,880
7,425
6,455
5,789
66
56
610
207
403
0.50
0.49
33.93%
$
$
$
$
2007
13,873
7,608
6,265
5,859
406
(177)
583
110
473
0.52
0.52
$
$
$
$
18.87%
Sun has a respectable market share
Before the crisis Sun was also profitable
Oracle’s good management experience will add to Sun’s value
Sun’s estimated EBIT for 2010 is $542 million
2006
13,068
7,439
5,629
6,085
(456)
219
(675)
189
(864)
(1.00)
(1.00)
-28.00%
$
$
$
$
2005
11,070
6,481
4,589
4,704
(115)
69
(184)
(77)
(107)
(0.12)
(0.12)
41.85%
Discounted Cash Flow Analysis on Sun
Year
EBIT
Tax at 33%
Earnings after tax
+Depreciation
-Capital expenditures
-Increase in NWC
Free Cash Flow
PV(at 8.19%) of FCFs years 09-17
$
$
$
$
$
Terminal value estimates 2018
Perpetual growth at 2% (FCFy10/(Kw-g))
Best guess terminal value
PV of Terminal value
Estimated value of firm
Value of excess marketable securities
Value of firm
Value of liabilities
Value of equity
Shares outstanding
Value per share
$
$
$
2009
(378)
(378)
770
(466)
(923)
1,781
$8,221
2010
542
179
363
$
785
$
$
$
$
$
$
$
$
2011
553
182
370
801
1,172
$
$
$
$
$
2012
564
186
378
817
1,195
$
$
$
$
$
2013
575
190
385
833
1,219
0
0
0
0
15,598
0
$9,340
17,561
0
0
0
15,598
17,561
7,927
9,634
754 million
12.78
Current Share Price
$
$
$
$
$
2014
587
194
393
850
1,243
$
$
$
$
$
2015
598
197
401
867
1,268
$
$
$
$
$
2016
610
201
409
884
1,293
$
$
$
$
$
2017
623
205
417
902
1,319
8.52
2% EBIT growth of Sun
Sun’s 2010 EBIT is based on Bloomberg Estimate
Acquisition Price is only 9.50, which is less than projected value per
share for Sun
$
$
$
$
$
2018
635
210
425
920
1,346
$
$
$
$
$
2019
648
214
434
939
1,373
Discounted Cash Flow Analysis on the Merger
Year
EBIT
Tax at 31%
Earnings after tax
+Depreciation
-Capital expenditures
-Increase in NWC
Free Cash Flow
PV(at 8.19%) of FCFs years 2010-2019
Terminal value estimates 2018
Perpetual growth at 4% (FCFy10/(Kw-g))
PV of Terminal value
Estimated value of firm
Value of firm
Value of liabilities
Value of equity
Shares outstanding
Value per share
$
$
$
$
$
2009
8,177
2,481
5,696
2,746
63
435
7,944
$93,513
2010
$ 10,124
3,138
6,985
$ 2,999
$
592
$ 1,521
$ 7,870
0
0
2011
$ 11,188
3,468
7,720
$ 3,258
$
658
$ 1,688
$ 8,632
2012
$ 12,263
3,802
8,461
$ 3,519
$
723
$ 1,857
$ 9,400
2013
$ 13,327
4,131
9,196
$ 3,779
$
789
$ 2,024
$ 10,162
0
0
210,176
2014
$ 14,359
4,451
9,908
$ 4,031
$
852
$ 2,186
$ 10,901
2015
$ 15,335
4,754
10,581
$ 4,271
$
911
$ 2,339
$ 11,601
2016
$ 16,378
5,077
11,301
$ 4,526
$
975
$ 2,503
$ 12,349
2017
$ 17,336
5,374
11,962
$ 4,763
$ 1,034
$ 2,653
$ 13,038
$210,176
303,688
303,688
$ 30,253
$ 273,435
5,754 million
$
47.52
Assuming a gradually decreasing EBIT growth of Oracle (12% to 5%) and 2%
EBIT growth of Sun
Sun’s 2010 EBIT is based on Bloomberg Estimate
Projected Share Price: 47.52
The new company after the merger will have projected value of $303 billion
2018
$ 18,185
5,637
12,547
$ 4,974
$ 1,085
$ 2,786
$ 13,650
2019
$ 19,075
5,913
13,162
$ 5,195
$ 1,139
$ 2,925
$ 14,292
Scenario 2
Year
EBIT
Tax at 31%
Earnings after tax
+Depreciation
-Capital expenditures
-Increase in NWC
Free Cash Flow
PV(at 8.19%) of FCFs years 2010-2019
$
$
$
$
$
2009
8,177
2,481
5,696
2,746
63
435
7,944
$77,393
2010
$ 9,525
2,953
6,572
$ 2,860
$
555
$ 1,426
$ 7,451
Terminal value estimates 2018
Perpetual growth at 4% (FCFy10/(Kw-g))
PV of Terminal value
Estimated value of firm
Value of firm
Value of liabilities
Value of equity
Shares outstanding
Value per share
2011
$ 9,985
3,095
6,889
$ 2,980
$
583
$ 1,497
$ 7,789
2012
$ 10,467
3,245
7,222
$ 3,105
$
612
$ 1,572
$ 8,143
2013
$ 10,974
3,402
7,572
$ 3,235
$
643
$ 1,651
$ 8,514
2014
$ 11,505
3,567
7,939
$ 3,372
$
675
$ 1,733
$ 8,902
2015
$ 12,063
3,740
8,323
$ 3,515
$
709
$ 1,820
$ 9,310
2016
$ 12,648
3,921
8,727
$ 3,665
$
744
$ 1,911
$ 9,737
2017
$ 13,262
4,111
9,151
$ 3,822
$
782
$ 2,006
$ 10,185
2018
$ 13,907
4,311
9,596
$ 3,986
$
821
$ 2,107
$ 10,654
2019
$ 14,583
4,521
10,062
$ 4,157
$
862
$ 2,212
$ 11,146
163,909
$163,909
241,302
241,302
$ 30,253
$ 211,049
5,754 million
$
36.68
Assuming 5 percent EBIT Growth of Oracle and 2 percent EBIT growth of Sun
Sun’s 2010 EBIT is based on Bloomberg Estimate
Projected Share Price: 36.68
Oracle is a Strong Buy
because;
• it is a highly profitable rapid growth
company with a solid balance sheet
• it generates cash
• projected value of per share after the
acquisition is between $36.68 and $47.52,
whereas the current share price is only
$22.44