$9.50 - and just who was "Party B"?

Last night, as a holder of a few hundred shares in Sun Microsystems (JAVA is their stock symbol), I finally received voting instructions and an explanation of the proposed merger with Oracle. This is actually the second time I've had the opportunity to vote on a company's proposal to end itself through merger - the first was just last fall, when SpaceDev (SPDV stock symbol) was acquired by Sierra Nevada Corporation. In both cases it's been a somewhat mixed experience emotionally. The acquisition price has been a significant improvement on the recent market price for their shares (for Sun, the $9.50 price is significantly above the roughly $5 it was trading at a few months ago), so that's nice on the money side. On the other hand the reason I was holding the shares in the first place was because I believed the company had great potential for the future. In both cases the average price I'd acquired shares at was somewhat above the final selling price, so it'll be a net loss (but not nearly as much as if I'd had to sell at the price well before the merger).

We've had a long and happy relationship with Sun, as a family. For Shelly and me, Sun workstations were our primary introduction to UNIX computing while we were graduate students at Cornell 20 years ago. Our first home computer was a Sun workstation (purchased while we were in Indiana, hefted to our door by a grumbling FedEx delivery person), and we used Sun machines at work in Indiana too. At Argonne we had a huge variety of (mostly UNIX) computing facilities available, but again some Suns in the mix. When I started work at APS the relative price and capability of Sun hardware was a big improvement on what they'd used before, and we accumulated quite a collection of Sun's before the recent move to more commodity servers and virtualization. Over the past few years Sun's Java has been one of the primary languages I've worked in. It was thanks to "Sun Expert" magazine which somehow followed me around for years that I first heard of Java (originally called "Oak") and was given other monthly enlightenment on computing and software.

The voting instructions included a special proxy statement with a "Background of the Merger" section that describes in some detail the sequence of events. There were significant news reports about IBM being in talks to acquire Sun earlier this year - this seems to correlate with the offers from "Party A" described in the proxy statement. Apparently IBM initially proposed a price of $8.40 to $8.70 per share, then bumped it up to $10/share under exclusivity conditions. A month later they went down a bit to $9.40/share and then proposed two alternative agreements at $9.40 or $9.10 per share, with various restrictions. At that point Sun rejected the offer from IBM based apparently on concerns about damage to the company if the deal should fall through, and started pursuing options with Oracle and "Party B". Oracle's proposal ended up at $9.50 per share, better than IBM's final offer; Party B apparently never made a concrete offer. So here we are voting on the $9.50. I voted in favor.

The merger agreement implies that Sun will continue operating (the merger is between a wholly owned subsidiary of Oracle and Sun, to continue operating under the Sun name), but of course Oracle will have complete control of what the merged Sun will do. Sun's hardware has had a tough time competing in what has become essentially a commodity business for computing power; Oracle's expertise isn't hardware either, so I'm not expecting that piece of Sun to continue for a lot longer. On the software side Sun has some immense assets in its stewardship of semi-open software like Java, Solaris, MySQL, OpenOffice/StarOffice, etc. Oracle's expertise in extracting money for software is pretty clear as well, so it'll be interesting to see them growing revenue from the software side in coming years - though perhaps not so good for those of us who use it.

The real question is whether both companies (and other old giants like IBM) are being left behind in the new iPhone/netbook/Web2.0/Google/cloud world of ever-more-ubiquitous always-on light-client-device/commodity server computing. Interestingly, both Sun and Oracle were long-time advocates of "thin clients" (as opposed to Microsoft's PC-centric view of the world) - their views seem to have won out, but in a way seemingly different from their vision and I don't think they were entirely prepared for this state of affairs. The future of computing will certainly be different from this point forward.

And I'll miss the old Sun.


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On who was party B - various

On who was party B - various reports from around May 12 when Sun's draft proxy statement was submitted to the SEC (just google for it!) indicate people believe it was HP. I'd probably have been happier with HP as owner of Sun than either Oracle or IBM, but evidently they didn't see it being worth it (which may be correlated). Oh well...