Sun proxy details its dating game
Three suitors and wacky questions
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You've been curious about the back story when Sun Microsystems, as Intel chief executive officer Paul Otellini succinctly put it, "shopped around the Valley and around the world."
And now, thanks to the Securities and Exchange Commission and the preliminary merger proxy statement Sun has to file by law as part of Oracle's proposed acquisition, the melodrama is there for you to read.
The proxy statement, which you can read here, shows that Sun had three companies chasing it. Well, one. Two of them were pursued by Sun at the advice of its board - one of them being Oracle, and the other not yet known by name.
The company that started off the whole mess was Party A, which has to be IBM based on the story line, whose chief executive officer (that would be Sam Palmisano), approached Sun's president and chief executive officer, Jonathan Schwartz, and another Sun board member about a "possible business combination transaction."
Between November 6 and December 19, Sun's management team and lawyers, Wilson Sonsini Goodrich & Rosati, had discussions with IBM and its lawyers to talk over the options. At this time, Sun's board decided it would be best to shop around a bit, and approached the management of Party B, which could be anyone but which was probably Hewlett-Packard but could be Fujitsu or even Cisco Systems.
All Sun says is that during the first quarter of 2009, its management and advisors were approached by "other parties" but with the exception of Parties A and B and Oracle, nothing evolved from those talks. My guess is that Party B is Hewlett-Packard, and that the other parties were Cisco and Fujitsu.
Anyway, on December 19, Party A (IBM, let's stop pretending here) and Sun entered into a confidentiality agreement (which apparently held for three months until the Wall Street Journal blew the covers off the talks because someone's tongue was wagging somewhere on March 18).
On January 28, IBM made a preliminary offer of between $8.40 and $8.70 per share, all cash, for Sun, and on the following day, Sun engaged Credit Suisse to act as its financial advisor and Sun had a regularly scheduled board meeting, where it talked over the deal.
Schwartz met with the CEO at Party B on February 12 and six days later, Sun entered into a confidentiality agreement with that company and Party B got on with the due diligence. IBM offered a revised proposal to Sun on February 20 for $10 a share in cash to acquire the company, and this deal was conditioned upon Sun having exclusive negotiations. Whoops.
Sun's board held meetings to talk over Party A and Party B three times between February 22 and 26, and on February 23, Sun's chairman, Scott McNealy, reached out to Oracle's chief executive officer, Larry Ellison, about making a "possible strategic transaction" with Sun. During this time, Party B was encouraged to make an offer for Sun, but declined, and Oracle kept its mouth shut. And so, on February 26, it took the exclusivity agreement with IBM and began negotiating the $10 per share deal.
COMMENTS
Why & Why
Anonymous Coward posts, "And for that, Schwartz gets $35m? How come?"
Unless you are paid to sell a company, why would a CEO sell the company (when he would most likely get fired in a re-org)? The CEO would most likely hang on as long as possible, raking in the doe, for years to come
The CEO was paid to sell the company, that is why. This was part of Jonathyn's reimbursement package upon being promoted. Large stock holders put increasing public pressure on him to sell the company.
GT posts, "The big question is why Sun missed out on the obvious combination. Apple..."
Apple and Sun nearly merged a half-dozen times over the years.
This is, perhaps, is the most significant question in the minds of many people. Apple and Sun had several opportunities to merge. Every time I saw video with Sun demos, Sun used Apple laptops. With X being built into every MacOSX instance, compatibility with accessing Sun server application was built in. Apple bailed on their storage business with Sun entering the storage business. Apple is ports Sun ZFS and DTrace to MacOSX; Sun ports Apple windows compatibility code to Solaris.
Perhaps, Sun was too broad a company for Apple to consume. Apple seems to be a very focused company, making significant dollars on very stove-piped business areas where it intends on competing in.
Sun competes in a lot more areas than Apple does - while this made Sun a visionary in the eyes of analysts, this may have been a detriment to the Sun brand among consumers, and may have been considered a possible negative as far as an Apple buy-out.
Money,Money, Money, It's a rich man's world
And for that, Schwartz gets $35m? How come?
Why did they miss the obvious suitor?
The big question is why Sun missed out on the obvious combination. Apple has fanatically loyal users in the client space: Sun has the same in the server space. Both companies had seen a move in architectures to Intel: in Apple's case, a wholehearted conversion, in Sun's case a start. Both companies' solutions are based on Unix: Apple has arguably the best client Unix, Sun the best server Unix and these could have been merged over a period of years. Sun could have provided a great channel for Apple to sell its clients, from iMac to iPhone, into its installed base. Apple would have given Sun financial stability.
Compared with this, the Oracle "merger" (=takeover) makes little sense for either organisation.
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