Saturday, November 22, 2008

Five reasons Sun won't be acquired | Business Tech - CNET News

Read the full article to review the five reasons

Sun Microsystems last week launched its second major restructuring for the year--with good reason.

The company posted a sizable $1.68 billion net loss in its fiscal first quarter last month, amid a 7 percent decline in revenue, as its traditional business of high- to midrange servers running on Sparc processors took a hit. Add to that a steep sell-off of its stock over the past 12 months, falling from about $25 a share earlier in the year to close at $3.02 a share on Friday.

For the embattled tech titan that's lost its allure over the years, a dramatic restructuring is virtually the only option to make good for Sun's investors--given prospective buyers aren't around, say some investment bankers and private equity players.

Here are five reasons why Sun won't be acquired, even if its stock is trading at dramatically low prices […]

One of my favorite Larry Ellison lines is “Every ecosystem needs a scavenger”; he said it in response to a reporter’s question about Computer Associates, when it was gobbling up second- and third-tier DBMS vendors many years ago (see this classic charlesf post for more context).  The CNet author isn’t thinking like a scavenger, and I think Sun’s days as an independent company are about to come to an end.

Back to the five reasons: Sun parts are worth more than its current market cap at this point, especially when the competitive potential, e.g., of IBM or Oracle (or Microsoft…) controlling Java, is factored into the analysis.  In a net-present-value equation, Sun’s patent portfolio alone is probably worth $Bs.

At its current stock price, Sun is worth $2.23B.  That’s about $1B more than Sun paid for MySQL AB at the end of February 2008.  Maybe Sun exists at this point primarily so Jerry Yang can have something to point to and say “It could be worse!”

Five reasons Sun won't be acquired | Business Tech - CNET News

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