Still Trying to Recover from the Dot-com Meltdown

By John Pallatto  |  Posted 2009-04-06 Print this article Print


Sun has been trying for nearly eight years to recover from the dot-com meltdown. Before the bust, Sun reaped huge profits because its servers powered the growth of the Web economy. After the bust, lightly used Sun servers were a glut on the market, sharply curtailing sales of new Sun servers. By the time the economy recovered, Sun found that its market was getting squeezed in the low and midrange by the likes of HP and Dell and on the high end by IBM.

As a result, Sun's server sales have stagnated, and it has had to repeatedly restructure. Although Sun's stock had clawed its way back into the $20 range since the dot-com bust, its share price has hovered between $4 and $5 for long stretches during this decade.

Thus it seemed that a buyout by IBM would be the best possible outcome for Sun-one that would enable Sun shareholders to reap a decent price for their much devalued assets and perhaps provide a way for the Sun brand to survive in the IT market for at least a little while longer.

Now everything is back to square one, and Sun finds itself in exactly the same position as Yahoo after it rejected Microsoft's very ardent buyout offers. Sun no longer has an offer on the table, and the future is looking dim.

Since it's likely that Sun has burned its IBM bridge behind it, Sun will have to find a new buyout prospect or look to its own devices for long-term survival in a recession-stunned market where hardware prices are under greater pressure than ever.

Some Sun shareholders may be left wondering whether the stubborn pride of the McNealy board faction has cost Sun its last best chance of reaping the most value for the company's assets.


John Pallatto John Pallatto is's Managing Editor News/West Coast. He directs eWEEK's news coverage in Silicon Valley and throughout the West Coast region. He has more than 35 years of experience as a professional journalist, which began as a report with the Hartford Courant daily newspaper in Connecticut. He was also a member of the founding staff of PC Week in March 1984. Pallatto was PC Week's West Coast bureau chief, a senior editor at Ziff Davis' Internet Computing magazine and the West Coast bureau chief at Internet World magazine.

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