updated 6/2/2005 10:46:53 AM ET 2005-06-02T14:46:53

Expanding its reach in the growing data storage market, server and software maker Sun Microsystems Inc. agreed Thursday to purchase Storage Technology Corp. for $4.1 billion in cash.

StorageTek shares surged Thursday on the New York Stock Exchange.

The deal, approved by the boards of both companies, is the biggest move by Sun since the Internet crash of 2000 decimated its sales and profits.

The two companies had combined sales of more than $13 billion over the past year, and Sun said the deal will add to its operating profit in the first 12 months after it closes, expected in the late summer or early fall pending regulatory and shareholder approval.

“Both companies have quite a strong tradition and commitment to generating cash,” said Scott McNealy, Sun’s chief executive. “When you put the two together, it will be very additive.”

Sun agreed to pay $37 per share in cash for StorageTek shares, representing an 18.5 percent premium over the company’s closing stock price Wednesday. The deal includes the assumption of StorageTek employee stock options.

Louisville, Colo.-based StorageTek, founded in 1969, makes tape drives and network management and backup software for businesses and government agencies. Sun also offers storage products but is better known for servers based on the Unix operating system.

“It’s clearly a major event in the history of (information technology),” said Patrick Martin, StorageTek’s CEO. “It joins together two of the industry’s leading technology innovators with over 60 years of combined experience in mission-critical environments.”

StorageTek, which will be integrated into Sun’s storage division led by Mark Canepa, currently has about 7,100 employees compared with Sun’s 32,000. It was not immediately clear what impact the deal would have on the companies’ work forces.

In 2004, StorageTek reported a net income of $191 million on sales of $2.22 billion, compared with Sun’s fiscal 2004 loss of $388 million on sales of $11.19 billion.

StorageTek has been rallying in recent years as companies struggle to find ways to manage the massive amounts of information generated by their businesses. But that has not always been the case: It filed for bankruptcy protection in 1984 and reorganized again in 1999.

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