End of days for Sun
August 14, 2009 —
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Sun Microsystems passed away on July 16, 2009. On that day, the company's shareholders voted to accept the merger agreement, proposed by Oracle, to purchase the company for US$5.6 billion, or $9.50 per share. Sun's CEO, Jonathan Schwartz, and its chairman of the board and cofounder, Scott McNealy, were not present for the shareholder vote.
Only nine years ago, Sun's stock was at $257 per share, with a market cap of almost $100 billion, and the company was making its own multi-billion-dollar acquisitions. So how did it all go bad? Sun executives would not comment for this story, but sources say that the company’s downfall came thanks to bungled acquisitions and an inability to turn technological innovation into reliable streams of money.
“Sun Microsystems is the Jack Kevorkian of technology acquirers,” said Bill Roth, former group manager at Sun from 1997 to 2003, where he supervised the launch of Java EE and Open Office. He said Sun frequently squandered acquired technology, and that its failure to address this pattern led to its ultimate demise.
“Look at all the acquisitions Sun made form 1996 through 2006, and I think you'll see that two out of the 40 did not fail. One was the piece they bought from Cray [in 1996 Sun purchased the Cray Business Systems Division from Silicon Graphics, and used the technology to create a new backplane board for its servers], the other you could argue was StorageTek,” said Roth. He highlighted the company's $2 billion purchase of Web server producer Cobalt Networks as symbolic of botched acquisitions.
Cobalt was a hot property in 2000 when Sun purchased it. Cobalt made one of the first dedicated commercial Web servers, but when Sun acquired Cobalt, it imposed supply chain restrictions that forced the smaller company to use Sun's hardware providers. As Cobalt was an Intel-based platform, Roth said that these supply chain restrictions resulted in a nine-month period after the acquisition during which Cobalt couldn't produce any of its servers for sale. In that time, the company's slim market lead was lost.