Sun Goes Down With a Whimper

By Anders Bylund | More Articles
April 29, 2009 | Comments (4)

This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.

-- From The Hollow Men by T.S. Eliot, 1925

Maybe you expected Sun Microsystems (Nasdaq: JAVA ) to make a grand show of its demise. We're getting none of that. Instead, the former high-tech superstar is slipping away quietly, in the dark of night, leaving nothing behind but what-ifs and woulda, coulda, shoulda scenarios. Oracle (Nasdaq: ORCL ) is buying a fallen star.

Oracle's acquisition of Sun is expected to close "this summer," assuming that regulators and shareholders approve. I don't see any reason why they wouldn't. There is some overlap between the companies' products and services, but hardly enough to raise regulatory eyebrows and hackles, and Sun is not likely to find a better exit deal anywhere else.

I still think that IBM (NYSE: IBM ) would have been a better fit for Sun. Hewlett-Packard (NYSE: HPQ ) is also pretty close to what Sun really wanted to be, with a finger in every pie at the data center. Even Cisco Systems (Nasdaq: CSCO ) would have made more sense as a buyer than Oracle, with its newfound love of server systems -- but this is what we're all stuck with now.

That's because Sun's possibly last-ever report showed few signs of life. Sales plummeted by 20% year over year to $2.6 billion, and last year's $0.04 GAAP loss per share ballooned to $0.27 per share. A year ago, Sun produced a healthy $267 million of free cash flow. Today, that torrent is reduced to a trickle at $58 million.

Nothing in this report is likely to pull IBM back to the negotiating table, or anyone else, for that matter. The period was so uninspiring that the customary analyst call was canceled, and there are no management quotes whatever in the report. It looks like these guys have given up. There will be no last-minute bidding war, and you might as well sell your shares today. I can think of plenty more rewarding places to invest your cash for the time being.

Sun is going out with a whimper, not a bang.

Further fickle Foolishness:

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.

Read/Post Comments (4) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On April 29, 2009, at 3:15 PM, catoismymotor wrote:

"Ohh, what's really going to bake your noodle later on is, would you still have broken it if I hadn't said anything?" The Oracle, The Matrix
Cause and effect. Chicken before the egg? Was it the recession or an established decline of Sun that lead Oracle to make the purchase?
Report this Comment On April 30, 2009, at 4:46 AM, opentrail wrote:

I actually think Apple would be the best company to buy SUN.
What with the Steve Jobs marketing team they can re-invent the wheel and sell it big time. Apple could finally break into the server market and each company could join their respective hardware engineering divisions. What with the cult status of Apple and that of SUN 20 years ago it would be a booming success story. Last but not least bringing in some zest to the JAVA brand and make it properitary to Apple.
Report this Comment On April 30, 2009, at 6:58 AM, mostlylucid wrote:

Apple and "open" are about as far apart as night and day. Apple is currently *still* taking advantage of developers on their iPhone platform - http://www.cnnmagazinebiz.com/
Steve Jobs marketing team is not what put apple over the top - it was a solid product handled with iron gloves. Nothing apple out and nothing "not apple" in. You can not even change the battery. Apple could be in a world of hurt if (when?) others finally wake up and start designing products (see android) that can compete.
As a developer of software I will certainly be watching what Oracle does with this closely.
Report this Comment On April 30, 2009, at 10:20 AM, myusrnam wrote:

You guys should have some humility. Instead of an article drawing unwarranted conclusions from Sun's earnings report, you should publish an article about your own lack of insight-----just a few weeks ago, you criticized Sun's management for walking away from IBM, because----as you asserted-----no other company would buy Sun. And---wah-la----immediately afterwards, Oracle came calling. Why not apologize to those of your customers who sold Sun stock based on your analysis, only to have it proven wrong within 2-3 days? And now you pick apart Sun's earnings report as proof that the company was hopeless. Doesn't it occur to you that this was a *quarterly* report, and for a good part of the last quarter, Sun's customers read, every day, about buyout negotiations with IBM, negotiations that never concluded? Don't you think that would hurt sales, and maybe *that*, and not some general malaise, could be responsible for the weak numbers? And, don't you think that the lack of initiative by Sun management to talk with analysts, or explain earnings, or forecast this-or-that---don't you think it could possibly be due to Sun's management knowing it is *OUT OF PLACE* for it to make comments like this when, in a few months, Oracle will be in charge? It's amazing to me that you can spout such nonsense, and get paid for it!

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