Sun reportedly in buyout talks ~~ CEO said to discuss potential $18.6 bln deal

SAN FRANCISCO (MarketWatch) -- On more than one occasion, Sun Microsystems' Chief Executive Officer Scott McNealy has publicly said the company he co-founded in 1982 has been for sale since Day 1.

And according to a published report, McNealy could be close to setting the right price that would take Sun private in a leveraged buyout.

BusinessWeek reported Friday that McNealy has had discussions with Silver Lake Partners about taking Sun

(SUNW: news, chart, profile) private in a deal that values Sun at $5 to $5.50 a share, or between $16.9 billion and $18.6 billion, based on Sun's current number of outstanding shares.

A Sun spokeswoman said the company had no comment on the report. Silver Lake didn't immediately return calls seeking comment on the possible deal.

news, chart, profile) . When Sun reported its third-quarter results April 14, it posted a loss of $9 million, breaking even on a per-share basis, on revenue of $2.625 billion.

Excluding charges and other one-time items, Sun's loss totaled $61 million, or 2 cents a share, missing the average estimate of analysts surveyed by Thomson First Call, who expected breakeven results on $2.74 billion in revenue.

But while Sun's reports and stock price might not be lighting the market afire, the company claims a loyal customer base and is known for developing innovative technologies such as its Solaris operating system and the Java programming language.

Mark Stahlman, a computer systems analyst with Caris & Co., said Sun "has emerged from the twilight zone" with new confidence from its installed customer base and products such as a line of servers that run on Advanced Micro Devices (AMD: news, chart, profile)

"There's very little capital-market support for tech companies right now," Stahlman said. "And Sun's stock has been treated as a trading vehicle for some time because tech is seen as out of favor as a long-term holding. If they go private, they get the flexibility of not having to be burdened with the public market.

Such a deal would the most-visible technology buyout in years and eclipse the March plan to take financial-services software company SunGard Data Systems (SDS:

private in an $11.3 billion. Silver Lake is also a partner in the consortium behind the SunGard buyout.

(STX: news, chart, profile) private in 2000 for $2 billion. Seagate became a public company again in December 2002 and today has a market cap of $8.3 billion.

McNealy dismisses Sun buyout report

By Rex Crum, MarketWatch
Last Update: 12:49 PM ET April 29, 2005

SAN FRANCISCO (MarketWatch) - Sun Microsystems's Chief Executive Officer Scott McNealy slammed a published report that he was considering taking his company private as "totally unsubstantiated rumor."

McNealy said in an e-mail to CNET Networks (CNET: news, chart, profile) that a BusinessWeek report that quoted an anonymous hedge fund source was nothing more than an attempt to lift Sun's share price in to take some quick profits.

According to CNET, McNealy said, "Why would a supposedly credible rag like BusinessWeek quote an anonymous hedge fund guy on a totally unsubstantiated rumor designed to spike the stock price? I will bet this hedge guy is laughing his butt off that BusinessWeek printed this as he profits from the $0.42 rise in the price this morning."

BusinessWeek reported Friday that McNealy has had discussions with Silver Lake Partners about taking Sun (SUNW: news, chart, profile) private in a deal that values Sun at $5 to $5.50 a share, or between $16.9 billion and $18.6 billion, based on Sun's current number of outstanding shares.

The report sent Sun shares up 21 cents, or 6%, to $3.64.

On more than one occasion McNealy has publicly said the company he co-founded in 1982 has been for sale since Day 1, for the right price.

A Sun spokeswoman said that despite McNealy's e-mail, the company didn't have an official on the report. Silver Lake didn't immediately return calls seeking comment on the possible deal.

Sun has been seen as treading water in the computer-server and systems market for several years, with stiff competition from the likes of International Business Machines Corp. (IBM: news, chart, profile) , Hewlett-Packard Co. (HPQ: news, chart, profile) and Dell Inc. (DELL: news, chart, profile) . When Sun reported its third-quarter results April 14, it posted a loss of $9 million, breaking even on a per-share basis, on revenue of $2.625 billion.

Stahlman said going private could make sense to Sun on several fronts.

Such a deal would the most-visible technology buyout in years and eclipse the March plan to take financial-services software company SunGard Data Systems (SDS: news, chart, profile) private in an $11.3 billion private buyout. Silver Lake is also a partner in the consortium behind the SunGard buyout.

Silver Lake also led the group that took disk-drive leader Seagate Technology (STX: news, chart, profile) private in 2000 for $2 billion. Seagate became a public company again in December 2002 and today has a market cap of $8.3 billion.

Rex Crum is a reporter for MarketWatch in San Francisco.

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