Monday, April 6, 2009

Genius alert: Sun Microsystems

Picture this: you are a dying, has-been tech company, whose extinction is just around the corner, with no real long term vision and multiple failed turnarounds, with competitors eating your lunch and soon your dinner.

A successful goliath who has reinvented itself and shown ability to adapt to any environment offers you a substantial premium and synergy savings through acquisition. The acquisition isn't a drop dead slam dunk for them but it is for you (i.e. this isn't even Yahoo - Microsoft, where Microsoft absolutely NEEDS Yahoo).

Do you
a) Negotiate in good faith
b) Reject the offer outright
c) Negotiate, seemingly in good faith, and then open up the negotiations to other bidders (who don't exist) even though you know that will cause your suitor to drop their bid

Well, Sun Microsystems chose c, and is likely doomed to extinction. It should have learned from Silicon Graphics and Unisys. I'm short Sun all the way down to $2. Jerry Yang looks positively like a rocket scientist compared to Sun management...

Update: 04/20/09: Wrong call on my part, ORCL is said to be acquiring Sun in order to gain control of MySQL, Java, and Solaris, which I admit is a much better strategic fit. 35% hit on this trade.

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