Oracle is buying Sun Microsystems in deal valued at $7.4 billion (5.08 billion).
The two industry giants have entered into a definitive agreement in which Oracle will acquire Sun stock at $9.50 (6.50) a share.
In an announcement to the press, Larry Ellison, Oracle's chief executive, predicted that through the acquisition, Sun could experience $1.5 billion in annual growth.
He said: "Solaris and Java have been instrumental in Oracle's decision to buy Sun. Oracle can increase investment in Java for its middleware and Solaris is by far the best UNIX technology available with more Oracle databases running on this than any other system."
The focus for the future is on building an integrated system, using the soon-to-be-created joint expertise and providing what Ellison called "an integrated system from database to disk."
Sun's chairman, Scott McNealy, added: "Sun and Oracle have been partners for over 20 years but today marks the next big step. This is truly momentous for the industry as we will be the only totally integrated system available and the largest supplier of Open software."
"There is no question in my mind that this deal redraws the boundaries in the industry."
Previously, it was IBM who was the favourite to buy Sun, but reports claim that the company had lost interest.
