Mini-case #6: Sun Microsystems

Mini-case #6: Sun Microsystems Introduction: The case is an exercise in valuing a potential acquisition target. You will use some of the exact same techniques that you have used in previous cases to value a company using both discounted cash flow and multiples in their analysis. You should consider synergies (how adding the two companies together will work well) and their relevance to the valuation. Questions:

  1. Is Sun Microsystems a good strategic fit for Oracle?
  2. What are some potential synergies?
  3. Conduct a multiples analysis to value Sun. What economic fundamentals are reflected in the multiples?
  4. Assuming a discounted cash flow valuation:
    a. What rate of return should Oracle require on the acquisition?
    b. What base-case cash flows do you forecast?
    c. What is your estimate of terminal value?
    d. What is the enterprise value of Sun Microsystems? What is the equity value?