Investors to Sun: We've Got Another Place for You to Put the Dot You Put in Dot-com
The market today continues to have its say on Sun’s rejection of IBM’s acquisition offer. The consensus: IBM threw Sun a rope and the company used it to make a noose. Shares of Sun–which fell nearly 27 percent Monday following the collapse this weekend of merger talks with IBM–are slipping again today on fears that the company has bollixed up what may have been its only chance at salvation.
And that may well be the case. IBM (IBM) was reportedly offering $9.40 a share for Sun (JAVA), nearly double Sun’s share price before investors caught wind of talks between the two companies. Seems a good price for Sun given its current situation. Certainly, there are no other offers on the horizon. Nor are there likely to be. “Others have already passed over Sun–given that, we’re unsure who would step up to the plate,” Edward Jones analyst Bill Kreher told Bloomberg. “We are unsure if the company can execute a successful turnaround on its own. Their future is very uncertain.” Toni Sacconaghi, an analyst with Sanford C. Bernstein, agreed. “A collapse in the talks has considerably weakened Sun’s hand, as we see no other likely suitors,” he said in a research note.
If that’s the case and discussions with IBM are truly finished–and there’s a chance that they might not be–Sun could be left facing some unpleasant options. “Sun will have to take alternatives by either splitting up or downsizing,” said George Weiss, a Sun analyst at Gartner. “Sun still has several options, since there are parts of the company that could bring value to one or several companies on the market. But those companies probably won’t want to acquire Sun as an entire entity.”