Patience of Sun’s largest shareholder wearing thin

Sun Microsystems’ largest shareholder, Southeastern Asset Management, is evidently losing patience with the company. A day after the maker of servers and software announced that its results for the most recent quarter would be less than analysts had expected, Southeastern converted its reporting of Sun holdings from a 13G filing to a 13D, “in order to be more active in corporate governance and management matters, and to have the ability to enter into discussions with third parties concerning proposed corporate transactions of a significant nature.”

Southeastern also revealed having added significantly to its Sun holdings over the last 60 days, during which it spent $171.7 million to buy 21.2 million shares at prices ranging from $10.01 a share Aug. 22 to $5.67 a share as late as Monday.

The firm cannot have been pleased to see Sun Microsystems (Nasdaq: JAVA) drop by a buck the very next day after the earnings pre-announcement, a 17.5 percent fall. Its shares are down another 3 percent at the moment, trading around $4.59.

Sun Mircosystem reverse-split its stock 1-for-4 almost a year ago in part to raise it — and keep it — above $1, the minimum level for continued listing on the Nasdaq stock market. Before the reverse split, Sun shares were trading around $5. Had that split not have happened they would currently be trading at around $1.15.

Southeastern said in its filing today that it “has talked to the Issuer’s management, and will have additional conversations with management and/or third parties, regarding opportunities to maximize the value of the company for all shareholders.”

In a letter to shareholders in June, Southeastern said that a shortfall in Sun’s sales earlier this year was attributed by Sun to a “postponement” of sales by several large U.S. customers and not a “competitive loss.” The investment firm said that Sun shares were selling at that time “for less than half of our conservatively assessed value. We have confidence in Jonathan Schwarta and his team and applaud their substantial share buybacks as well as their strategy for creating competitive advantage through open systems.

No reiteration of such sentiments was made in today’s filing.


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  • My Little Pony

    Sun is toast, classic Innovator’s Dilemna study. The arrogance of the management team – couldn’t happen to a nicer group of guys..