DealZone

Sunset

November 12, 2008

Caught between the credit crisis of 2008 and never having fully recovered from the bursting of the Internet bubble in 2000, Sun Microsystems‘ prospects are being eclipsed by a sunken share price and grumpy investors. Anupreeta Das and Jim Finkle report that Sun could be forced to sell itself or some of its assets.

Sun shares are down 77 percent this year, more than double the decline in the Nasdaq, and 98 percent below levels seen at the peak of the dot-com bubble. Top Sun shareholder Southeastern Asset Management has said it might talk directly to third parties about alternatives. Private equity firm Kohlberg Kravis Roberts, another shareholder, may also support a sale after having written down the value of its $700 million debt investment in the company, bankers and analysts say.

“We are in a complex industry and our growth plan and progress can’t be easily measured by our stock price,” Sun spokesman Shawn Dainas said in an e-mailed statement. He said in an email that technology bets in areas such as multi-threading systems that handle more than one set of software instructions at once and open storage systems, which combine open-source software with standard hardware, are paying off.

Assuming for a moment that this argument fails to convince investors to hang on and decides to explore a sale, the company will have a tough time pricing itself. “Tight credit markets and the challenge of valuing Sun’s intertwined software, hardware and services businesses could put off potential buyers,” Das and Finkle report.

Deals of the day:

* NTT DoCoMo and India’s Tata Teleservices will announce a capital alliance later on Wednesday giving Japan’s top mobile operator a foothold in the world’s fastest-growing mobile market.

* Property developer Stockland Group has bought a 12.7 percent strategic stake in rival GPT Group, dealing itself into any potential takeover bid for the group and sending GPT’s shares up 37 percent.

* Microsoft is moving closer to an agreement with Verizon Wireless to become the default search provider on the wireless carrier’s cellphones, the Wall Street Journal said, citing people familiar with the discussions.

* Indonesian coal miner PT Tambang Batubara Bukit Asam may pull out of a consortium that has agreed to buy a stake in Bumi Resources Tbk, the country’s biggest coal miner, because of a slump in Bumi’s share price, the state enterprises minister said.

* General Motors is seeking to raise its stake in its commercial vehicle venture with SAIC Motor, China’s biggest automaker, China Business News said.

* Dentsu, Japan’s biggest advertising firm, said it will acquire McGarry Bowen, one of the largest independent advertising companies in New York, as the company aims to bolster revenue outside its slowing domestic market.

* Kuwait’s Noor Financial Investment said two foreign financial institutions were considering buying up to a 51 percent stake in troubled Gulf Bank.

(Photo credit: Reuters)

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