I found the quote in question in the NY Times
Best, Mark
bits.blogs.nytimes.com
New York Times
Friday, October 10, 2008
October 9, 2008, 7:30 pm
Sun Microsystems: A Lesson in Failed Cosmetic Surgery
By Ashlee Vance
Sun Microsystems, one of the world’s largest server and software makers, finds itself in an awkward position: It might soon have enough cash to buy all of its stock and go private.
Sun’s shares dropped close to 8 percent Thursday, closing at $5.21. The company now has a stock market value of $3.9 billion and has close to $3.5 billion in cash, its chief executive, Jonathan Schwartz, said in an interview Thursday after the market closed.
Last November, Sun engineered a one-for-four reverse split that bolstered its stock price from about $5.14 to more than $20 per share. That move was meant, in part, to satisfy institutional investors who have limitations on investing in so-called penny stocks — stocks that trade for less than $5 a share. It was also aimed at assuaging customers who worried about Sun’s long-term viability with such a low stock price.
Not only have those gains proved ephemeral, the fact that shares are once again trading so low means that roughly three-quarters of Sun’s already depressed market value was wiped out in the past year. A shareholder who bought Sun’s stock at its September 2000 peak — back when the company boasted it was “the dot in dot-com” — would have paid $257.24, adjusted for splits, and lost 98 percent of his money if he still held it today.
Mr. Schwartz is unfazed. “The reverse split was cosmetic, and any sophisticated investor knew exactly that,” he said. “It was designed to get our share price off the agenda. Thankfully now, even though it has declined, our customers’ share prices have declined even farther. Now, it’s a balanced conversation.”
Sad to say, that’s probably true. Sun counts much of Wall Street, including the bankrupt Lehman Brothers, as customers, and also sells to troubled industrial giants like General Motors.
For its fiscal year, which ended in June, Sun reported revenue of $13.9 billion -– just a 0.1 percent rise over the previous year. It also posted a year-on-year drop in net income to $403 million from $473 million.
Despite having the best product line in the company’s history, Sun’s unit shipments continue to fall while revenue languishes. The company has tried to offset slowing growth in its old-line server business by going after new lower-end server sales and by expanding its software portfolio.
While some of these new products have shown strong growth, Sun has failed to replace that old revenue at a quick enough clip. In addition, the company has been hit particularly hard by the Wall Street problems, as Sun leans heavily on sales to customers in the United States and in the financial services industry.
Speculation has started to mount in recent months that Fujitsu, which shares server technology and manufacturing with Sun, will seek a merger with the company.
I asked Mr. Schwartz if he’d considered following Advanced Micro Devices’ lead by selling Sun’s hardware business to another company, allowing it to concentrate on being a software company. (Sun offers a popular operating system known as Solaris and a host of business software. It also recently acquired the open-source database maker MySQL for $1 billion, which competes with Oracle, Microsoft and others.)
“We are always thinking about being more creative on behalf of our shareholders,” Mr. Schwartz said. “We want to drive maximum value for them.”
Ultimately, however, he maintained that the “systems” approach — in which a company controls all the major aspects of its technology, from hardware to software — appears to be the more attractive option.
Not surprisingly, he also sees Sun’s sagging share price as an opportunity.
“I think that makes us a screaming buy for investors that want to own a central part of the Internet,” he said. “I think for strong-willed and potentially strong-stomached investors there will be some exceptional buying opportunities out there. I don’t know which way our price is going right now, but I know there is a reason they call it a business cycle and not a business vector.”
Like a number of hardware makers, Sun is pushing the idea that smart, creative companies will buy new technology that helps them save costs now and prepares them to exit the downturn — there is an exit coming, right? — in fighting fashion.
But then again what else do you expect a hardware seller to say? |
