Case $48\_$Sun$\_$Microsystems Case Guideline

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Case $48\_$Sun$\_$Microsystems Case Guideline

Suggested Questions

Is Sun Microsystems a good strategic fit for Oracle? Should Oracle acquire Sun Microsystems? What is the managerial decision?

What is the value of Sun as a part of Oracle? What approaches would you use to place a value on Sun Microsystems? How much is Sun worth as a stand$-$alone company?

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?

Conduct a multiples analysis to value Sun. What economic fundamentals are reflected in the multiples?

Identify the synergies and conduct a sensitivity analysis to estimate the effect of synergies on enterprise value.

What would your bidding strategy for Sun be$?$ If a competing bidder appears, how high a price should Oracle be willing to offer? At what point would you stop negotiating any

further?

Sun Microsystems Historical and Projected Balance

Sheet

$($in millions of U$.$S$.$ dollars$)$

$\backslash$table$[[,$Fiscal Year$-$End June $30$