Something is definitely going on over at the Sun Microsystems camp right now. Since I wrote my first piece on the topic of a Sun takeover by Google, numerous visitors from SEC and Sun Microsystems internal servers have been flocking to read the analysis.
Then, when I penned "McNealy Resigns, Google To Buy Sun," only two days ago, the story broke over both Yahoo! Finance and Silicon Investor like wildfire: with over 800 visits in a single day, and a top Digg post, speculation became rampant. With so much attention, and so many anonymous repeat visits from Sun servers, it is difficult to believe that there is not a shred of truth in the argument that the search engine giant is planning a takeover of McNealy's hardware company. I have e-mailed Jonathan Schwartz to comment on the speculation too, but mysteriously, he has not replied so far.
The Stat Meter on my personal blog has really revealed something potentially enormous only an hour ago however: Sun insiders seem to be speculating too that Google will buy them out. The Stat Meter shows the IP addresses, the visit time and the referral address of every visitor (assuming the visitor is on a public server): the referral address of the link is where the visitor clicked to come to the destination.
In a recent visit, an unknown visitor came from a private e-mail inside Sun's server - hence they were an employee of Sun Microsystems - which seems to have been titled "Possibly True"). In short, it now seems Sun employees are speculating that the company are about to be bought out by Google - either that at least, or they know something they are not currently at liberty to reveal.
On top of that, I have recently heard from an anonymous source that McNealy's recent sale of $10 million of Sun Microsystems stock was in fact a sale-and-buyback: McNealy was excercising stock and buying back options at a cheaper price. If this is the case - which by all accounts, it seems to be, since the price of Sun equity hardly flinched over the sale - then this is classic pre-takeover behaviour, since part of the package McNealy would have been offered by Google to facilitate the takeover would surely have inluded cheaper options in the hardware giant. If Google is due to bankroll Sun, then it is Page and Brin who provide the collaterol for this discount option buy-back: otherwise, the question remains, whose paying for McNealy's gain?
Google and Sun are surely in cahoots - and this time the evidence is not supported by external market factors, but by the inside.
Article comments
— go to most recent comments1 - Aaman
This proves nothing really - locker room gossip is generally driven by net rumors, and you're merely witness to an interaction that confirms your own belief - If you cared to look at the actual referring URL closely - http://nwk-mail1.sfbay.sun.com/frame.html?rtfPossible=true&lang=en
You will see that it is not the subject that is 'Possibly True' but a flag 'rtfPossible=true' - it is intellectually dishonest of you to believe that this flag is the subject. Email subjects are not exposed in referrer URLs, IMHO.
The rumor may come true, sooner or later, and then you can do another post "I told you so", but this post is vacuous and tenuous in it's argument
2 - Aaman
On re-reading, I might have come across as more strongly than I intended, and merely wished to indicate your interpretation of the 'title' of the email is not valid - my apologies for any stronger connotations.
3 - Clark Culver
There is another problem with the facts. Instead of relying on some "anonymous source," why not just check the SEC's site ? He excercised options and immediately sold the stock. There was no sale-and-buyback
This is beside the main point, that it would make no business sense for Google to buy Sun. The Google shareholders would freak out and dump the stock. GOOG shares would be instantly cut in half. What a disaster !
4 - Nathaniel Winn
I gotta agree with Aaman:
You post speculation that the hottest tech company in the world is buying Sun -> Sun employees read your speculations.
Proving that employees are interested in their fate; nothing more.
(I'm not in any way affiliated w/ Google or Sun. I just care about truth and logic.)
5 - Daniel M. Harrison
Aaman:
I had the same thoughts and I've had this checked into by technical experts and the evidence overwhelmingly seems to point to the fact this is an e-mail, not a link. But thanks for flagging this one up.
Clark: the option-part of the option buybacks-trade is not listed in the same way ... it was a buyback (I'll try to get the numbers for you over the next few days). This was not a straight sell. In fact, I can't believe I hadn't thought about it first time round as a possibility, since just as I said, what was so bemusing was the fact that SUNW stock hardly budged an inch on the sale.
"This is beside the main point, that it would make no business sense for Google to buy Sun. The Google shareholders would freak out and dump the stock. GOOG shares would be instantly cut in half. What a disaster !"
Unless of course Google's stock was already in deline, which it is. What would you rather have, a $50 billion company that's purely Google, or a $50 billion company that is Google and Sun? This is the real decision execs are facing right now - what the would be using is a concept known as "arbitrary leverage" - using today's price highs to capitalise on a bigger outcome in the future when they know valuation is in decline. It's the way all the dotcom's that are still in business today weathered the storm of the early millennium. Look at it like that, and it makes total sense.
on top of this, Goog have very positive earnings but they are all 'pure play' - that is, attached to one market niche, i.e. ad's. Even Goog execs themselves admitted as much that this is a long term threat in the leaked powerpoint presentation, however, it also stated that earnings are solid for at least 2006 (which covers 2007 by implication). In other words, short term they can swallow Sun's negative earnings (which are on the increase) and capitaise on this growth to see their own balance sheet through into the future. A Sun t/o is totally consistent with Google's current strategy.
Nathaniel:
"... employees are interested in their fate; nothing more."
Fair point, but I find what stands now at about over 500 Sun hits a little peculiar if this is just myth - I'm even getting repeat visits from Sun servers. This is being bandied about the company, basically ... it says something. Myth tends to be dismissed and forgotten immediately, even if it's good.
I tell you what - thanks for all the initial interest: just tell me what you guys DO want to hear and I'll research it then and put it up here.
6 - Aaman
An interview or inside info from a Sun exec would top the opinion, and turn it to news
7 - Daniel M. Harrison
OK, fair suggestion Aaman, let me see what I can do.
8 - Alex
If you don't get answers from Sun exec, it will be interesting.
9 - A user
I think big foot might be holding Schwartz hostage. If this is not true then I'm sure we'll get an email from big foot. In anycase Apple hasn't said anything about this story either, it sounds like they might merge with Sun and Google
10 - scott
Pure speculation.
11 - Kevin Hutchinson
Scott McNealy only pays himself a tiny salary each year, so typically funds himself (and his GMC-lovin family) via share and option sales. It's similar to Steve Job's situtation at Apple down the road in Cupertino.
Google will NOT buy Sun - it's a poor fit for them, The genuine big things that are happening at Sun are:
1) Sexy new storage systems for media companies
2) Bigger Galaxy servers from Andy B
3) Niagara chips to run Linux very soon
4) Lehman (CFO) will cut costs and turn a profit
I hold a few SUNW shares.
12 - Samh
SUN employees probably have no idea wether the company is being bought or not, but as it effects their jobs they are likely to be interested.
13 - unbeliever
I can't say much for your technical experts then! As Aaman says, the 'rtfPossible=true' is obviously a flag - simply indication that Rich Text Format (RTF) is possible - perhaps meaning the recipient can cope with it.
And why wouldn't SUN employees email the url to you blog around - I'm sure they're at least as interested in unfounded speculation about their company as everyone else - probably a lot more so.
As others have said, why would google buy a niche hardware company so deep in the red?
14 - Kenzie
Wouldn't "rtfPossible" be referring to Rich Text Format?
15 - Aaman
Isn't rtf a Microsoft format? Funny that:)
16 - Charlie (Colorado)
Oh, this is just silly. Of *course* that rumor got lots of people from Sun reading it. What do you *think* would happen?
Schwartz hasn't replied because he hasn't stopped laughing yet.
17 - originalgeek
Here's a copy of an email a friend of mine who works for Sun sent me...apparently this is an internal chain letter floating around that he cc'd to me.
To: originalgeek@{obfuscated}.com
From: {obfuscated}@sun.com
Subject: Looks like easy days ahead for us =) lol
Apparently since Scott sold some of his stock to generate some capital to exercise more of his stock options, we are now going to be bought out by Google. At least according to this section of the blogoshpere:
Have a look and a good laugh. And give me some of what that guy has been smokin'.
18 - Dave Nalle
Didn't this entire rumor originate from someone mis-reading a headline about Google switching their servers from Windows NT machines to Sun machines?
Dave
19 - pbj
I would have to disagree with the idea that Sun would not be a good fit for Google.
Do you have any idea how many servers Google stands up every month? I don't, but I'm sure it's a pretty big number. Plus, the latest news that Google is gunning to be everyone's storage provider. The savings on hardware alone is a pretty big benefit.
Then there's StarOffice and Java.
20 - Ernie Oporto
Makes sense. Google will be switching over to Opteron systems. Sun has all those new, sweet Opteron servers. There's at least a major partner ship in the works.