March 19, 2009

Sun Microsystems in Play

For a couple of days now Sun's stock has been the subject of speculation due to IBM's wish to acquire the company. Strangely enough the company would have been worth more a month ago, since IBM's interest is unlikely to be in Sun's hardware range (which IBM would be well advised to spin off as no longer a part of their core competency).

No. IBM's interest in Sun is its software, which in turn means its people. So the price would have been higher before Sun's recent round of layoffs. If the deal goes ahead it's an unfortunate fact that many remaining Sun employees will lose their jobs because there will be duplication of administrative functions. I doubt, though, that many of those with higher-level technical skills will find themselves redundant, as they are the basis of the $7bn valuation of Sun.

I should have bought Sun stock at $4 a year ago (but didn't, for reasons I won't bother to go into here). But I think even at $8 I'll manage to make a modest profit on them.

1 comment:

Alex said...

"I should have bought Sun stock at $4 a year ago (but didn't, for reasons I won't bother to go into here)." -- hmmm, what about the fact that a year ago JAVA was over $15 -- reason enough?-)

I got in a few months ago at well over $5 (mistimed calling the bottom of the market pretty badly, not just for Sun but for quite a few of my stock picks) and was very happy to sell at almost $9 yesterday soon after the jump; I would recommend against getting in at $8 or so -- yeah, there's upside, but the downside's even bigger.

Actually I'm seriously considering selling a big bunch of wildly out of the money put options -- most likely I'll just pocket the modest premium, but if the IBM deal goes awry market sentiment will drop off a cliff and I might rake in what's still a good longer-term stock to bet on at a firesale price...