a tale of two companies justin pearlman senior director...
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A Tale of Two Companies
Justin Pearlman
Senior Director, Global Trade Compliance
Oracle Buys Sun
REDWOOD SHORES, Calif., April 20, 2009 -- Oracle Corporation (NASDAQ: ORCL) and Sun
Microsystems (NASDAQ: JAVA) announced today they have entered into a definitive agreement under
which Oracle will acquire Sun common stock for $9.50 per share in cash. The transaction is valued at
approximately $7.4 billion, or $5.6 billion net of Sun’s cash and debt. “We expect this acquisition to be
accretive to Oracle’s earnings by at least 15 cents on a non-GAAP basis in the first full year after closing.
We estimate that the acquired business will contribute over $1.5 billion to Oracle’s non-GAAP operating
profit in the first year, increasing to over $2 billion in the second year. This would make the Sun
acquisition more profitable in per share contribution in the first year than we had planned for the
acquisitions of BEA, PeopleSoft and Siebel combined,” said Oracle President Safra Catz.
“The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and
mission-critical computing systems,” said 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. Our customers benefit as their systems integration costs go
down while system performance, reliability and security go up.”
“It was the best of times, it was the
worst of times…”
• - Charles Dickens, A Tale of Two Cities
• Sun is a paradigm shift – change in basic assumptions
• Increased complexity and risk
• Opportunity to improve and extend trade compliance automation
strategy
• Business/compliance process re-engineering
4
*GAAP revenue reported in USD as of May 31, 2011
Scale
• $13.8B in revenue (2007-2008)
• 47,000 customers
• 34,000 employees
Innovation and Investment
• Leading provider of standards-based computing infrastructure,
including enterprise computing systems, software and storage
• Products included servers and workstations based on its own
SPARC processors; storage systems; and, a suite of software
products (including Solaris), as well as Java, MySQL, and NFS
• Main manufacturing facilities were located in Hillsboro, Oregon and
Linlithgow, Scotland
Sun Microsystems
*GAAP revenue reported in USD as of May 31, 2011
Scale
• $35.6B in revenue on a trailing twelve-month basis*
• #1 in 50 product or industry categories
• 370,000 customers
• 20,000 partners
• 108,000 employees
• 10 million developers in Oracle online communities
Innovation and Investment
• 15,500 customer support specialists, speaking 27 languages
• 20,000 implementation consultants
• 1.5 million students supported annually
• 870 independent Oracle user groups with 355,000 members
Oracle Corporation
Two Companies
Sun
• 32 Trade Compliance FTE (30k employees globally)
• >$4M annual operating budget
• Combined Export and Customs Functions
• Reporting through Legal Compliance & Ethics
• More operationally focused
• Combination of SAP GTS global trade application, customized and manual solutions
• Compliance disclosures
Oracle
• 2 Trade Compliance FTE (80k employees globally)
• <2M annual operating budget
• Separate Export and Customs Functions
• Reporting through Chief Corporate Architect and Tax, respectively
• Concentrate on compliance oversight
• Oracle ITM Adapter, 3rd party compliance content, customized solutions
• Clean compliance record
Two Compliance Challenges
Sun (Complex and Decentralized)
• Export from US, UK, NL
• Importer of record in >15 countries ($1.5B in imports in 2008)
• Hardware, firmware, software...
• Global R&D Centers
• Global Spares Hubs
• Global Supplier Network, Internal and 3rd Party Manufacturing
• Multiple instances: 10.7, 11i, Soleil…
• >24 download sites
• Extensive ITAR portfolio (SunFed, Sub Labs, Test Facilities)
Oracle (Less Complex and Centralized)
• Export from US, IE
• Few imports
• Software distribution
• Global Single Instance
• Source code access controls
• 3 download sites: EPD, OTN, MOS
• Limited ITAR portfolio
End State Objective
• Decommission SAP GTS, implement Oracle GTM
• Enable ongoing fulfillment in a compliant manner
• Meet Sun’s legacy functionality/integration, extend to Oracle business
• GTM must have better or same performance as SAP GTS
• GTM must handle high volumes, including web client screening
• Accuracy of compliance control for license determination and RPLS
• Improve screening efficiency by proper configuration of RPLS engine
• Right-size staff (14 FTE, >50% reduction)
Integration, Assimilation, & Indoctrination
2008 Pre-Acquisition Sun/Oracle GTM Collaboration
Apr ‘09 Acquisition of Sun Announced
Oct ‘09 GTM Team Hands-on Work (Phase 1)
Nov ’09 Business Requirement Gathering
• GTM Application Set-up & Configuration
Jan ’10 Oracle/Sun Legal Entity Combination
Jun ’10 GTM Phase 1
• Beta Environment, Validating Set-ups, Items,
Parties, Shipsets, UAT, Bugs, etc.
Aug ’10 GTM (6.1) Phase 1 Go-Live
Jan ’11 GTM Phase 2 Go-Live
Jun ’11 GTM (6.2) Phase 3 Go-Live
• Aug/Dec ’11 Extend GTM to Spares and Oracle E-Delivery
Internal Implementation ProjectTimeline
Oracle‟s Trade Compliance AxiomsInternal GTM Automation Requirements
• Must assist with compliance objective
• Must support from anywhere to everywhere demands
• Must be agile and adaptive to business and regulatory change
• Must enable and support efficient and effective compliance program
• Must be business friendly, accessible, and available
• Must help make the complex simple
“Thoughtomation”
• It’s the data, stupid. Or, better yet: it’s the stupid data!
Quality (garbage in = garbage out)
Availability/Access
Centralize, Standardize, Automate
• Automating bad business process leads to automated
bad business process
• Configurability essential to meeting changing business,
regulatory, and technology challenges
• Setup changes to be made by business user, minimizing
IT dependency
Automation RoadmapCurrent Status and Next Steps
Phase 2 (Live 01/07/11)
o Bi-directional integration with Oracle GSI R12.1.3 using BPEL
o Support Oracle’s trade compliance processes for hardware transactions
o Restricted party screening of customers and suppliers
o Schedule B/Harmonized system upload
Phase 3 (Jun „11)
o Upgrade/patching to GTM 6.2 and integration with Oracle GSI R12.1.3 –
remove dependency on ITM adaptor
o Apply Restricted Party Screening to Oracle Software orders
o Automatic re-screening of change orders (end-use, end-user, bill to, ship to,
sold to, quantity, ship from inventory org.)
o Manual export re-screening and hold functions
o Return-to-Vendor handling (RTV)/Return Material Authorization (RMA)
o Flat file/batch screening
o Extend automation to spares/repairs, document management, E-Delivery
Global StatisticsScope:
• All domestic and international hardware, software, and web client orders
• Multiple distribution points
• GTM export licensing logic applied to all countries/territories
Volumes:
• Daily volume averages:
o 2,500 software transactions per day
o Between 8k and 10k transaction lines per day (sales order lines)
o Hundreds of hardware transactions per day
o Thousands of Spares transactions per day
• Significant volume through web clients (tens of thousands per day)
• Achieving a target RPLS hit rate of <2%, permitting better visibility to transactions of interest and driving significant operational efficiency.
• 700-1500 GTM updates (item synchronization) per day
• 2k parties updated per hour (every 10 minutes) – account/ supplier parties and addresses created/updated in GSI and synchronized with GTM
• Daily RPLS upload to ensure current and accurate screening data
• >130 Red Flag words
Value Delivered
Operational ROI:
• Centralized, Standardized,
Automated
Product Classification
Restricted Party List Screening
(RPLS)
License Determination
• Improved service
• Reduced operating costs
• From reactive to proactive
• Actionable intelligence
• Redefined cost-center value
proposition
Supply Chain Value:
• Trade compliance automation critical
to efficient fulfillment
• Does not enable bad supply chain
process, assists in identifying and
addressing it
• Product classification and license
determination required for fulfillment
process
• Greater supply chain/business
process visibility and collaboration
• Compliance is not a process
constraint
Questions & Answers
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