Sun-Apple deal moribund
Apple `not currently in merger discussions with any party'
Rumors of Sun Microsystems purchasing Apple Computer flowed freely in late January and early February, as Apple reeled from a $69 million quarterly loss. Early news reports indicated the two sides were apart on price, with Apple seeking a premium for its stock, and Sun wanting to pay $23 per share. (Apple's price reached a low of $28 in late January, and again in early February.)
The Wall Street Journal broke the news of a Sun-Apple merger in its January 23rd issue, reporting Sun was working furiously on a stock swap proposal valued at $4 billion, or about $33 per share of Apple's stock. But two days later, The New York Times said undisclosed Sun sources called the $33 offer wishful thinking and that the true offer would be $10 per share less, or about $2.8 billion.
In January 26th's San Francisco Chronicle, "Business Insider" columnist Herb Greenberg cited undisclosed "plugged-in sources" who said "Much of what has been published so far has missed the mark. To label `as fact' that any firm offer has been made by Sun, as of late (Thursday), would be `making it up.'" Greenberg's column left readers with the impression Sun was responsible for the news leaks, which were, in effect, negotiating tactics to drive down the price of Apple's stock.
As the week ended, news reports suggested talks between Sun and Apple had ceased. Reuters reported Motorola had joined the bidding. Motorola manufactures the CPUs used in Apple's computers and printers. There were also news reports that Sony was planning a bid for Apple. As January came to a close, Apple's stock dipped to a 52-week low of about $27, which analysts said was near its "natural level" in light of the lack of serious takeover talks.
On February 8, Apple issued a press release saying it was "not currently in merger discussions with any party." Newly installed Apple CEO Gilbert F. Amelio said in the press release, "I fully expect that our customers' grandchildren will be buying Apple products."
Sun declines to comment on the rumors.
(See the attached resources for other coverage on this story.)
Users think purchase a good idea
Rumors that Sun Microsystems might purchase Apple Computer surfaced just before Apple's annual stockholder's meeting. Apple is reeling from a $69 million loss in its first fiscal quarter that ended December 29th. Despite the loss, Apple's sales for the quarter grew. Last year's sales totaled $11 billion, almost double Sun's $6 billion.
Questions pertaining to the discussions were met with an official "no comment" from Sun Microsystems, and protestations that Apple is not for sale from Apple's chairman, A.C. (Mike) Markkula, who was ousted two weeks after making this statement at the Apple shareholders meeting. Gilbert F. Amelio, an Apple board member and former CEO of National Semiconductor, assumed Apple's helm.
Sources said the desire of Apple executives to secure employment guarantees and positions on the board of directors of prospective parent companies caused recent discussions between Hewlett-Packard and Apple to break down. Consensus opinion holds that Apple's business management is among its weakest assets, so no thoughtful suitor is likely to entertain such demands.
For Sun Microsystems users, the key question is whether a successful bite of the Apple will leverage the firms' strengths, or divert resources from Sun's core business mission. Opinions vary.
"If Sun acquires Apple it will make Sun the center of the not-Microsoft world, and that is good. On the other hand, it is much easier to see how Apple benefits from such a deal than it is to see how it benefits the traditional Sun customer," said Mike Prince, MIS director for Burlington Coat Factory (Burlington, NJ), a long-time Sun customer.
Don Crabb, a computer scientist at the University of Chicago, and a syndicated columnist focused on Apple Computer issues, said Sun's prospective acquisition of Apple is a win-win deal.
"This would not be an unwanted diversion of Sun resources," said Crabb. "Sun has got to fight Microsoft, and that means being able to compete for the desktop. That means having an operating system mere mortals can use, and having a larger installed base on the desktop. I think it could be a very positive move for Sun, as well as Apple," Crabb said.
For Carnegie Mellon University (Pittsburgh, PA), where half the computers are Macs, but where most of its Unix servers are Suns, news of the possible deal raised more concerns for the Mac than for the future of Sun. Of the five major Unix workstation and server vendors, only Sun and Silicon Graphics Inc. do not have a personal computer solution, said Erikas Napjus, CMU's director of networking. This deal would obviously correct the situation for Sun.
For Sun VAR, Artecon Systems' (San Diego, CA) director of marketing, Dana Kammersgard, news of the deal prompted more questions than concerns. Apple, he mentions, said they are getting out of the low-end of the desktop market because they have not been able to make it work for them. "Why would Sun jump into the low-end, non-SPARC hardware, and non-Unix operating systems all in the same leap?"
In spite of a few concerns, and many more questions, Burlington Coat's Prince, said he has to respect the fact that "Sun has run a darn good business for many years. Every year people say Sun will lose market share but they hold their own or grow market share. You've got to respect that and give them the benefit of the doubt," he said.
Prince said a lot of people have been asking him to consider adding Macs to Burlington's IT infrastructure, but he's resisted. If Sun was running the Apple show, Prince said he would be willing to give the question a much closer look.
Just how Sun would approach integrating Apple's strengths into its planet structure is open to speculation. Would Sun attempt to leverage its manufacturing planning and design prowess to squeeze greater efficiency from Apple's plethora of hardware options, or would it sell off the Power PC-based platform designs to clone makers?
Would Power PC-based Macs survive at all, or would the future high-end Mac be a symmetric multiprocessing UltraSPARC system that boots to a smiling face? Would Sun aggressively seize the corporate desktop challenge using the more friendly MacOS as its competitive advantage, yet leave alone Apple's strength in sales to elementary and secondary education?
In the next few days it is likely Sun's deal to acquire Apple will
either fall apart or move forward in a public manner. Answers to more
strategic questions will take longer. Regardless, it is clear that
Sun's vision of computing articulated in the mid-1980s, that the
network is the computer, drives the current debate. Having successfully
supplemented the technical workstation with the business computing
server, we can only wait and see if it seeks to strengthen its role on
the corporate desktop.
--Barry D. Bowen with Mark Cappel
About the author
Barry D. Bowen (firstname.lastname@example.org) is a business computing analyst and writer with the Bowen Group Inc. (http://www.nas.com/~xeno). Reach Barry at email@example.com.
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