The transaction ends speculations about the future of Sun Microsystems, a major player in the computing arena that has lost its glitter in recent years as competitive pressures in the market place crimped its operations and forced it to seek alliances with stronger and bigger players.

Oracle's move was unexpected in several quarters although there were reports Sun Microsystems was in discussions with other potential buyers, in addition to its on and off talks with IBM. Oracle said it offered to buy Sun Microsystems to beef up its software offerings and add "mission-critical computing systems," according to Oracle CEO Larry Ellison.

"Oracle will be the only company that can engineer an integrated system—applications to disk—where all the pieces fit and work together so customers do not have to do it themselves," Ellison said in a statement. "Our customers benefit as their systems integration costs go down while system performance, reliability and security go up."

Oracle will pay $9.50 per share in cash for Sun Microsystems, representing a 42 percent premium to Sun Microsystems' closing price on Friday, April 17. The deal will help boost Oracle's pro forma earnings about $1.5 billion in the first year, rising to $2 billion in the second year, according to the company.

The transaction, according to Oracle, gives the company two key Sun Microsystems software, including Java and Solaris, which Oracle already deploys in its products.