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05/13/2003 Entry: "Sun Eclipsed?"

Sun Eclipsed?

What's up with all the takeover rumors about Sun Microsystems? They've been dismissing as "rubbish" all the speculation about Sun getting bought by a private capital investment firm. Yet, there's been a significant little pop in the stock in the last week, and people have been talking about their former exec Zander working for a big investment firm and being in a great position to know all about what's useful and profitable at Sun and what's not worth the silicon it's fabbed on.

So is Sun ripe to pluck? Their stock price is irrationally low and they have about 3 billion in the bank, with a market cap of only 12 billion or so. That means someone only needs to come up with 9 billion since they get the bank cash when they buy the company. Who's in position to buy a behemoth like Sun? Well, there are always the capital investment firms, then there's Microsoft, Intel, IBM, and HP. I imagine that given the lawsuits between Sun and Microsoft that a Microsoft purchase could be construed as anti-competitive. Intel would love to have a real Server OS of their very own, but there's that pesky Sparc architecture that they'd get smacked down for eliminating, as it competes directly with Intel's 32 and 64 bit server Pentium and Itanium chips. IBM has the same problem, but fewer lawsuits. And HP just swallowed Compaq, so I doubt they're in a position to swallow another whale. Plus, they have a plethora of their own OS's and architectures, so anti-competitive allegations are likely there too.

Does a private capital investment group really want to buy Sun and take it private? Could they run it better without having to answer to shareholders? How huge will the layoffs be?

Everyone who bought Sun at $60/share must be bawling in the gutter right now.

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