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By Michael Neubarth
IBM's attempt to buy Sun was a momentous event that burst into the news and captured our attention. The collapse of the IBM-Sun negotiations and Oracle's last-minute swoop-and-scoop maneuver was dramatic and surprising. The whole affair was a little dizzying, as are the industry ramifications of an Oracle-Sun conglomerate.
Although there was a welter of reporting as the saga unfolded, new information keeps surfacing that casts new light on the deal, the players, and their motives. We learn that what was reported in the media, while based on the available evidence, was only a dim reflection of what was really happening. Indeed, there are as many gray areas to this story as a Rembrandt etching.
Revelatory documents like Sun's recent SEC filing clarify much that was hidden in the shadows, while the post-deal spin emitted by the various parties continues to muddle the picture.
With the dust having settled a bit, we can, like forensic investigators, sift through the fragments and attempt to put the pieces together to gain an understanding of what happened and what it means. So let's review the events and see what we can determine.
First Impressions In Medias Res
That acquisition talks between IBM and Sun were taking place was first reported in The Wall Street Journal on March 18, 2009. Although a shockwave of buzz followed the disclosure of the deal, what was reported was mostly rumor and conjecture.
As The Register reported:
"What we actually know amounts to very little. The Wall Street Journal printed a story based on information received that IBM was thinking of buying Sun. IBM said "no comment" as did Sun. Neither company denied that acquisition talks were taking place."
Through Sun's recent SEC filing, we now learn that IBM and Sun had been talking since November 2008, and had been negotiating in earnest since December 19, 2008.
But in March, when news of the negotiations leaked out, neither party would officially comment. The fact that IBM and Sun managed to keep their talks secret up to mid-March was notable. It would be interesting to learn how The Wall Street Journal got wind of the deal, and whether the story was purposely leaked.
In any event, the terms of the deal as first reported were accurate. IBM was offering Sun $10 per share, which was 100% more than Sun's valuation at the time. At roughly $7 billion, this would be IBM's largest acquisition ever, and at that price, IBM's buyout terms were seen as generous.
Who Approached Whom?
The initial media reports were that IBM had not been actively pursuing Sun, rather that Sun had been shopping itself around for the past few months.
The Wall Street Journal in breaking the story, reported that:
"In recent months, Sun has approached a number of large tech companies in the hopes of being acquired, said people familiar with the matter. The world's largest tech company, Hewlett-Packard Co., declined the offer, said a person briefed on the matter. A spokesman for Dell Inc., the world's third-largest server maker, declined to comment."
Likewise, The New York Times reported:
"Silicon Valley executives, including Paul S. Otellini, chief of Intel, have said that Sun has spent months seeking a suitor."
This was essentially accurate, albeit incomplete. It was true that Sun representatives were approaching potential buyers, but also true that companies including IBM, HP, Oracle, and undisclosed others were contacting Sun. HP's interest, we later learn, was deeper than suspected. Moreover, as we will see, there was a hidden web of dealings.
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