Sun Microsystems under pressure to find buyer

In the wake of Q3 losses of USD1.7bn, Sun Microsystems is under pressure to find a buyer in the face of mounting debt. Private equity firm Kohlberg Kravis Roberts and Company, which is writing down the value of its USD700m investment in Sun, is reportedly interested in a potential sale. Information Week reports that majority shareholder Southeastern Asset Management is also exploring options for Sun with "third parties" independent of the company's board of directors. Potential buyers include Fujitsu – the only other vendor offering Solaris/UltraSPARC-based servers – and Sun's rivals IBM, Dell, HP, EMC Microsoft and Lenovo.

While analysts such as Shelby Seyrafi of Caylon Securities are convinced Sun has no choice but to put itself on the market, others doubt the company has much to offer potential buyers.

"If you buy this company, you are just going to buy baggage," says Global Equities Research analyst Trip Chowdhry. "The cost structure is through the roof. The product road map is nonexistent and customers are leaving in droves? only a dumb company would think of buying Sun."

Even if Sun considers selling off business units, its software and server assets are too tightly integrated to sell separately. However, data storage unit, StorageTek, which the company bought in 2005 for USD4.1bn, operates independently. Investment bankers estimate its value to be between USD700m and USD1bn. The company's other independent unit, Red Hat rival MySQL, is currently valued at approximately USD300m.

To survive, Sun will have to rely on its established corporate customer base, says Charles King, principal analyst at Pund-IT. "It is important to remember that despite its ongoing problems, Sun continues to drive USD12bn plus in annual revenues? unless [the buyer] is capable of inspiring a large number of those customers, I believe any sales strategy or acquisition involving Sun could do more harm than good."