Oracle: Is The Street Ignoring The Risks In The Sun Deal?

Oracle (ORCL) shares actually have gained ground since the company announced its plans to acquire Sun Microsystems (JAVA) thanks in part to the company’s promises to make the deal rapidly accretive to earnings. But in their enthusiasm for the deal, investors may be ignoring some significant risks.

Cowen analyst Peter Goldmacher today cut his rating on ORCL to Neutral from Outperform, asserting that the Street’s assumptions about how the the deal will boost profits are overly ambitious “given the considerable challenges” associated with the combination. He contends the decision to do the deal was largely defensive, as Oracle sought to keep Java out of the hands of IBM (IBM), given that the programming language is the base for its entire software stack, and notes that Sun is 4x larger than any company ORCL has ever bought.

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