Why is Oracle picking up the Sun mess?

Since word got out that Oracle will buy Sun for $9.50 per share cash, 10 cents per share more than the IBM deal Sun walked away from, we have been asking one question.

Why?

Oracle insists this will improve its earnings right away, although Sun had been losing money, and that there are synergies between its enterprise software and Sun's mission-critical hardware.

This seems absurd given that Sun reported a $209 million loss last quarter. But its gross margins on hardware remain high, so maybe if you blow out the company's operating infrastructure quickly you can make the numbers work.

The deal also seems to bust a big hole in Oracle's cash vault. So again, why?

Some theories:

1. Oracle's cash was doing poorly. It lost more from investing and financing last quarter than it gained in operations. Operations seem a better place to put cash.
2. This is a defensive move. To quote the press release. "The Sun Solaris operating system is the leading platform for the Oracle database." Want that in a rival's hands?
3. Oracle has experience cutting the bureaucratic heart out of its acquisitions quickly, yet retaining their book of business. Sun's hardware customers can't move that fast.
4. Scott McNealy probably gave a good presentation about Sun Federal. There is big money to be made working for the government. He can still build that business under Ellison.

As to open source itself, I don't think it was relevant to this deal.

I don't think mySQL or Java are being given a high value in the deal's paperwork. Although it will be fun for Oracle to meet all those companies that ditched it for the cheaper open source alternative, and some will shout "antitrust" as a result -- in which case Oracle can just spin it out.

Why did Sun decline to dicker with Oracle while it fought for every penny with IBM? There is something to be said for the cultural divide between Silicon Valley and Armonk. McNealy and Ellison speak the same language, McNealy and IBM not so much.

One final thing. This deal needs to be finalized quickly. Today competitors can spin stories of Sun being rotten fruit and Oracle being money hungry. That will only die down once the combined sales forces can get into the field with a shared story, after the deal goes down.

Personally I think this is a bad fit and that Oracle will rue this day. But I don't have any money riding on it.