Burn Out

The IBM/Sun deal has broken up. Rumors are that IBM wanted to lower its price.

Sun, once one of the “four horsemen of the internet,” has been pummeled as recession-battered customers defer new tech purchases. Demand for servers has fallen for a year, and last quarter fell 14 percent. And Sun’s servers, technologically advanced, are expensive. A Sparc Server costs over $30 grand, and that’s without the software.

Like any star past its prime, Sun has two choices: it can burn out or fade away. A deal with IBM would have allowed the company to integrate its expertise into a larger, better financed rival-at the cost of jobs and control. But by walking away from a price twice its pre-merger level, Sun has told its shareholders that it would rather fade away than be swallowed up.

Nobody likes to lose control. But IBM may have been Sun’s last, best hope. HP and Dell have already said “No, thanks,” and Cisco doesn’t usually buy companies to turn them around. Instead of going out as a supernova, Sun’s board has elected to fade into a white dwarf.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-04T17:52:02+00:00 April 8th, 2009|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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