Scott McNealy, Chief Executive of Sun Microsystems, “will soon move on from the company”, Forbes reports today, after recent revelations from Mark Stahlman, a research analyst for Carris and Company.
When the analyst last spoke with McNealy about his plans, he indicated that he was staying on “until the job is done” and concurred that finishing the job meant at least three things — reestablishing product superiority, regaining control over costs and igniting demand in a broad and balanced customer base.
“In our opinion, these three criteria have largely been met,” wrote the analyst in a recent report. “Accordingly, we will not be surprised if McNealy does indeed decide to step down.”
This latest revelation only increases the likelihood of a Google purchase of the hardware giant, something I argued for recently, which was very widely received by the online media and financial community only two weeks ago. It seems highly plausible that McNealy has been liquidating positions in accordance with a privately pre-arranged deal with Google Chairmen Page and Brin, who would need the excess liquidity of the stock in order to execute a successful buy-out of the hardware goliath: only a little over a week ago, he sold $10 million worth of Sun Microsystems stock that he owned personally.
Given Google’s current budget, McNealy will surely come out of this a handsomely rich man if this is the case, which may be just what he was hoping for all along: for some time now, he has been conspicuously inconspicuous in public appearances. Indeed, apart from declaring war on Microsoft, there has been little heard from the formerly extroverted CEO. The denunciations of Microsoft in themselves too have been peculiar: although it is known that McNealy and Gates share an age-old rivalry, what the current Chairman of Sun has been singing recently sounds much more in harmony with Google than with the former.
Consider this updated 3-month trading chart, benchmarked against the NASDAQ:
Google has been trading well under the NASDAQ benchmark index for some time now, and there is no clear signal that things are getting any better – Sun, by comparison, seems to be performing well above and there is every indication the price is headed further upwards. To honestly believe that the Chairman of Sun Microsystems’ sale of seven figures worth of equity on Sun’s market capital of ten figures would result in a further spike in the equity price if there was no agenda in play is almost unbelievably naïve of the functions of capital markets. Equity exchanges are the very oceans of the traditional supply-demand rationale: if there is no sufficient demand in the marketplace there cannot be a hike in prices – and for there to be any kind of price lift there has to be momentum – from whatever area – to keep this sustained.
Not only does the diversion of the companies’ share prices seem auspiciously coincidental when taken into account with McNealy’s alleged departure, but here is Google CEO Eric Schmidt, too, who has also, strangely enough, remained mysteriously silent since his ascendance to the Google throne. Only last week, respected technology pundit Paul Kedrokey remarked on his blog, Infectious Greed:
As an aside, can anyone out there provide me with personal and direct evidence that Google CEO Eric Schmidt is real? Because the more I see him (he increasingly strikes me as a less spontaneous and convincing Al Gore — yes, I know that is hard to imagine), the more I think that Larry and Sergey created him from spare parts as a grad-school engineering prank to convince Kleiner and Sequoia that Google had adult leadership.
Quite. The truth is, it looks increasingly likely now that he might well have been instated early, in order to prepare the groundwork for the pending merger.
When I first wrote about the possibility of a Sun-Google merger on the midwest’s most influential political weblog, Iowa Voice, most widespread criticism focused on two reasons:
1. Why would McNealy sell Sun equity if there was going to be a buyout?
2. Why would Google acquire Sun when it could cost them up to $50 billion, and reduce their own equity price to shreds of what it is today?
The reality is that Scott McNealy has probably come out of this looking prettiest of all – with a lucrative severance package, a small long-term non-controlling (and hence no hassle) stake in a technology goliath that combines both hardware and software, and a reputation for having paved the way for what might have otherwise only been a fairly small long-term player in the corporate technology market to become a company with potentially the largest market capitalisation in history, he has not lost anything compared to what he might have otherwise walked away with – a large stake in a mere $20 billion company.
Recent news and comments by leading analysts at major city institutions have pointed to the ‘organic’ nature of Google’s growth: the implication is of course that Google, as the trading chart shows, has to acquire growth now if it wants to accelerate at the same speed as it has formerly been used. And again, as I have argued before, without a hardware platform the world’s favourite search engine has little to rival Microsoft’s Windows Vista: already too, Microsoft is beginning to embrace the web with the likes of its Channel 9 blog, and may well start to reach out into areas of virtual organisation with a deft alacrity if Google does not act soon.
All things considered, a purchase of Sun Microsystems would be a timely and well-planned strategy for everyone: McNealy retires a rich and popular CEO, Schmidt would have a real job to get down to, and Larry and Page, naturally, would end up owning the rights to half the world’s technology.