Oracle Cutting more Sun Jobs

Associated Press

 

Oracle Corp. is cutting more jobs as part of its takeover of slumping computer-server maker Sun Microsystems.

Oracle, the world's biggest database-software maker, said in a regulatory filing Friday that the new round of cuts would mostly hit employees in Asia and Europe.

It didn't specify how many employees would be laid off. But it did say the new restructuring would be at least twice as expensive as the one Oracle initiated immediately after closing the Sun deal in January.

The new cuts will cost Oracle $675 million to $825 million. The previous cuts, which are ongoing, will cost an estimated $325 million.

Affected employees started to get notified May 28.

Oracle declined further comment. Oracle had 106,492 workers as of the end of February.

Sun had already cut deeply before Oracle took it over.

Last October, while the $7.4 billion takeover was being held up over antitrust concerns in Europe, Sun announced plans to jettison 10 percent of its work force, or up to 3,000 jobs. It had already cut 7,600 workers in three previous rounds of layoffs.

When Oracle was allowed to consummate the deal in January, its CEO, Larry Ellison, said he planned to hire more people for the Sun businesses than he would fire in the first few months after the acquisition. He estimated the Sun layoffs in that period would be about 1,000 workers.

The deal was a lifeline for Sun, one of the world's biggest server makers whose losses were mounting, and a way for Oracle, one of the world's biggest business-software makers, to challenge IBM Corp. in more markets.

Oracle CEO: About 1,000 Layoffs Planned for Sun

AP

Oracle Corp. CEO Larry Ellison cheered the closing of his company's $7.4 billion acquisition of Sun Microsystems on Wednesday, vowing that Sun will immediately add to Oracle's profits. He said layoffs won't be as severe as some industry analysts were predicting.

Analysts had expected Sun to suffer huge job cuts once Oracle closed the acquisition. But Ellison said Oracle wants to bulk up Sun's staff to improve its sales - a problem Sun has had trouble cracking since the dot-com meltdown a decade ago.

Oracle is hiring 2,000 people over the next few months for the Sun businesses, while layoffs from the acquisition will be about half that number, Ellison said.

"We're hiring, not firing. We're not cutting Sun to profitability," Ellison said at a conference with industry analysts at Oracle's headquarters here. "We think Sun's a growing business."

Ellison also confirmed that he's interested in buying the Golden State Warriors basketball team, a prospect that had been rumored.

"I'm trying," he said, in response to a question. "Unfortunately you can't have a hostile takeover of a basketball team." The line that got laughs because Oracle is a highly acquisitive company and won a bruising hostile takeover fight for rival PeopleSoft, a $10.3 billion deal Oracle closed in 2005.

Ellison had previously expressed interest in buying an NBA franchise and could take the Warriors if current top man Chris Cohan eventually decides to sell.

Oracle said Wednesday that it completed the Sun acquisition, one week after the European Union offered its long-awaited approval of the deal. European regulators determined the combined company would not harm competition in the database software markets, where Oracle dominates but a Sun division is a growing rival.

Sun was a dot-com highflyer that advanced the technology used to link computers, making them more useful as a network.

The deal with Oracle was announced last April. The U.S. Department Justice cleared it four months later.

With Sun, Oracle gets ownership of the Java programming language, which runs on more than a billion devices, and the Solaris operating system. Oracle also gets sophisticated server technology that it can bundle with its task management software. Sun is the world's No. 4 server maker.

One reason job losses may be limited is the fact Sun has already cut deeply because of its sagging finances.

In October, Sun revealed plans to cut up to 3,000 jobs as the antitrust scrutiny dragged on. Sun has already cut about 7,600 workers in three previous rounds of layoffs.

Sun had 27,596 employees at the end of September.

Previous Oracle acquisitions have been followed by deep job cuts.

Oracle fired some 5,000 workers after completing the PeopleSoft deal. Many of the layoffs came from PeopleSoft's 11,000-plus work force. The next year, Oracle cut about 2,000 jobs after absorbing Siebel Systems Inc., a company it bought for $5.85 billion and had 4,700 workers.

Companies More Prone To Going 'Vertical'

Wall Street Journal

Larry Ellison is known for forward thinking. With his new business model, 

though, the billionaire chief executive of software maker Oracle Corp. is taking a page from the past

Mr. Ellison plans to buy Sun Microsystems Inc. and transform Oracle into a maker of software, computers, and computer components -- a company more like the U.S. conglomerates of the 1960s than the fragmented technology industry of recent years.

"It is back to the future," he told financial analysts in October.

Mr. Ellison is among the executives reviving "vertical integration," a 100-year-old strategy in which a company controls materials, manufacturing and distribution. Others moving recently in this direction include ArcelorMittal, PepsiCo Inc., General Motors Co. and Boeing Co.

The reasons vary. Arcelor, the world's largest steelmaker, wants more control over its raw materials. Pepsi wants more authority over distribution. GM and Boeing are moving by necessity, to assure quantity and quality of vital parts from troubled suppliers. Some are repurchasing businesses they only recently shed.

"The pendulum has shifted from disintegration to integration," says Harold Sirkin, global head of the Boston Consulting Group's operations practice. He attributes the change to volatile commodity prices, financial pressures at suppliers and quests for new revenue -- challenges exacerbated by the recession.

Just two years ago, for example, Mr. Ellison said Oracle would stick to its traditional focus on software. Computer hardware isn't "a business we have any ambitions in," he said then. In a September speech, he called that view "fundamentally wrong." Mr. Ellison declined to comment for this article.

The moves toward vertical integration are a departure from the past half-century, when companies increasingly specialized, shifting functions like manufacturing and procuring raw materials to others. Steelmakers in the 1980s sold their mining operations; in the 1990s, auto giants spun off their parts suppliers. Tech companies stopped making every piece of a computer system and specialized in chips, data storage or software.

The guiding principle was that specialization would boost efficiency and quality. Today, a typical corporate computer system might be assembled by Accenture PLC with data-storage systems from EMC Corp. and computers from Hewlett-Packard Co. that use chips from Intel Corp. to run Oracle software. Now, Oracle is trying to combine all those functions.

Others are pursuing similar strategies. Pepsi plans to repurchase bottlers it spun off in 1999. Back then, Pepsi executives wanted to focus on marketing and leave most operating decisions to the bottlers. Now, as consumers flock to noncarbonated beverages, Pepsi is keen to gain more control over the distribution of its growing menu of offerings, says spokeswoman Jenny Schiavone.

Such steps don't necessarily portend a return to the early-20th-century vertical conglomerates of Andrew Carnegie and Henry Ford. Then, Carnegie Steel Co. and Ford Motor Co. each owned iron-ore mines, while controlling everything from manufacturing to sales.

"The historical view of vertical integration was that you had complete control of the supply chain and that you could manage it the best," says Bain & Co. consultant Mark Gottfredson.

Today's approach is more nuanced. Companies are buying key parts of their supply chains, but most don't want end-to-end control.

Some moves may face resistance from regulators. The Federal Trade Commission, for example, is reviewing Pepsi's plan to buy its two largest bottlers. At the Justice Department, antitrust chief Christine Varney has signaled interest in scrutinizing vertical deals.

Regulators in recent decades have blessed most vertical mergers on the grounds that they make firms more efficient, lower costs and benefit consumers, says M.J. Moltenbrey, an attorney with Howrey LLP in Washington, D.C. Instead, regulators have focused on preventing one company from dominating a specific market.

The European Union has moved to block Oracle's $7.4 billion acquisition of Sun on such grounds, fearing Oracle would have too much control of one software niche. (A spokeswoman for Oracle says the company sees no such conflict and is confident it will gain clearance for the deal.) The EU, however, hasn't expressed concern about Oracle's move into hardware.

While many companies, such as Coca-Cola Co. and Toyota Motor Corp., are content to stick to their current business models, others find they have little choice but to vertically integrate. In the past two years, Boeing bought a factory and a 50% stake in a joint venture that make parts for its troubled 787 Dreamliner jet. The moves partially reversed Boeing's aggressive outsourcing strategy to assemble the Dreamliner from parts made by hundreds of suppliers. Supply and assembly problems have knocked the Dreamliner more than two years behind schedule. Boeing CEO Jim McNerney says the company is still committed to outsourcing.

Likewise, GM in October took a minority stake in Delphi Automotive LLP, its biggest parts supplier, and purchased four factories and Delphi's steering business as the supplier emerged from bankruptcy. GM, which spun off Delphi in 1999, wanted to assure uninterrupted supply, a spokeswoman for the company says.

Johnson Controls Inc., another big auto-parts maker, last year bought a 70% stake in the interior-product business of bankrupt supplier Plastech Engineered Products Inc., to guarantee supply.

Several steelmakers are also embracing the shift, moving deeper into the raw-materials business that earlier steel companies exited. Arcelor has acquired mines in Brazil, Russia and the U.S. and expanded existing mining operations in recent years. Strategy head Bill Scotting says the Luxembourg company is trying to hedge against price fluctuations for iron ore and coal and supply-chain disruptions amid rising Chinese steel consumption and mining-industry consolidation.

"If you're buying fully from a market, you are relying on that market's supply chain," Mr. Scotting says.

Nucor Corp., which makes steel from recycled metal, last year bought a major scrap-metal processor. Nucor moved as scrap prices soared. Prices have since dipped, but Chief Executive Dan DiMicco says owning the supplier will help Nucor manage inventory more efficiently, eventually saving the company more than $100 million annually.

"Information on markets is extremely valuable in the scrap business," Mr. DiMicco says. By controlling supply, "you have more control over your own destiny."

Perhaps the most dramatic reversal is taking place in the tech industry, where specialization and outsourcing had dominated for decades.

Through the 1970s, computer makers such as International Business Machines Corp. also made the semiconductor "brains" of their machines, the data-storage devices and the software that made the computer useful. In 1969, the U.S. government, in a landmark antitrust suit, charged IBM with illegally bundling hardware, software and services to hinder rivals.

The government dropped the case in 1982. By then the evolution of technology had achieved what the lawsuit could not: IBM's mainframes were rivaled by less-expensive minicomputers and personal computers that ran on software from many vendors.

Oracle, founded by Mr. Ellison in 1977, quickly flourished in part because its database software could run on multiple types of computers, including IBM's. That allowed Oracle to also sell to companies that used computers from Digital Equipment Corp. and Honeywell International Inc.

The technological shift ushered in a period of innovation and specialization. Entrepreneurs devised software for particular tasks, such as word processing or accounting. Semiconductor companies, such as mobile-phone mainstay Qualcomm Inc., specialized in designing chips; they hired other firms to manufacture them.

A few years ago, the pendulum began swinging the other way. In 2005, Oracle started a strategy of buying other software makers. Last year, H-P acquired Electronic Data Systems Inc., which manages corporate computer systems, to strengthen its consulting arm and exert more control over a key sales channel. Rival Dell Inc. recently bought tech-services firm Perot Systems Inc. for similar reasons.

This month, H-P said it would buy 3Com Corp. for $2.7 billion to bolster its computer-networking unit. Rob Cihra, an analyst for Caris & Co., called the move an effort to "vertically re-integrate" to gain control over customers. An H-P spokeswoman declined to comment.

Apple Inc. last year moved to re-enter the semiconductor business after a two-decade hiatus, buying chip maker P.A. Semi and hiring chip engineers. By developing its own chips for new mobile devices -- a departure from the industry trajectory -- Apple hopes to tighten control over a key technology and keep it away from rivals, according to people familiar with the matter. An Apple spokesman said executives weren't available to comment.

At Oracle, Mr. Ellison's shift is among the industry's most pronounced. For 32 years, Mr. Ellison was a big proponent -- and beneficiary -- of specialization in what he called the "horizontal computer industry." Oracle's forte was task management software to help companies run their operations more efficiently. The model generated big profits for Oracle, which avoided the expense of manufacturing computers.

With the Sun deal, Mr. Ellison scrapped that strategy. Now, he wants to sell "complete systems" made of chips, computers, storage devices and software from Oracle. Mr. Ellison is betting that the combination will appeal to corporate customers tired of assembling technology from multiple vendors.

Mr. Ellison himself invokes the old IBM. "We want to be T.J. Watson Jr.'s IBM," Mr. Ellison said in September, referring to IBM's president from 1952 to 1971. He said IBM in that era was "the greatest company in the history of enterprise in America" because its hardware and software ran most companies.

Sun was something of an anachronism that still made its own chips, storage devices, software and computers -- much like the old IBM. Over time, this diversification hurt Sun, which couldn't simultaneously keep pace with innovation from Intel, EMC, Microsoft Corp. and IBM. In today's changed tech landscape, Mr. Ellison sees those multiple product lines as assets.

His change of philosophy seems sudden. As recently as March, Oracle tried to buy only Sun's software products, according to a filing with the Securities and Exchange Commission. But when IBM neared a deal to buy Sun, Mr. Ellison decided he, too, wanted the whole company. Oracle won by offering $9.50 a share for Sun, or 10 cents a share more than IBM's bid.

During the meeting with analysts last month, Mr. Ellison said that he changed his mind quickly, calling the acquisition "opportunistic." Then, he set out to combine Sun's hardware with Oracle's software. Mr. Ellison recently unveiled such a computer, which he says searches data faster than rivals, and costs less. Oracle says it plans to make Sun computers with specialized software for tasks such as billing and managing retail stores.

Oracle will still sell software to customers that have H-P's computers, and Sun computers that will run software from its rivals. But Mr. Ellison has pledged to invest more in Sun's chips and other equipment than Sun did.

"We weren't in the hardware business, now we're diving in with both feet," Mr. Ellison said at the October event.

Noting Oracle was bucking a decades-long trend in the industry, Mr. Ellison said: "We're really brilliant, or we're idiots."

Sun Anticipates Missing Wall Street's Expectations

By The Wall Street Journal

Sun Microsystems Inc. on Tuesday projected a wider fiscal-fourth-quarter loss and lower revenue than Wall Street had been expecting, in what may be its last quarterly report as an independent company.

But Oracle Corp., which is close to completing a $7.38 billion deal to buy Sun, continues to predict the acquisition will boost its profits.

Sun's results would continue a series of losses that helped push the computer maker into the arms of software giant Oracle, which edged out International Business Machines Corp. to buy Sun.

Once one of Silicon Valley's most influential companies, Sun reacted later than competitors to a shift to low-price server systems. More recently, the company suffered more than competitors because many customers were concentrated in the hard-hit financial-services sector.

Sun projected a loss for the period ended June 30, excluding items, of six cents a share to 16 cents a share on revenue of $2.58 billion to $2.68 billion. Analysts polled by Thomson Reuters, on average, had forecast a one-cent loss on revenue of $3.03 billion.

Oracle reiterated an estimate made in April that it expects the Sun acquisition to add at least 15 cents a share to its earnings, excluding items, in the first year after the deal closes. It estimated that the business will contribute more than $1.5 billion to operating profit, increasing to more than $2 billion in the second year.

The deal, expected to close this summer, requires regulatory and shareholder approval. Oracle said last month that the U.S. Department of Justice had made a second request for information as part of its antitrust review of the proposed transaction, focusing on plans to license Sun's widely used Java software technology. Sun shareholders are set to vote on the deal Thursday.

If IBM Buys Sun, What Does It Mean For Linux?

Originally Posted to ZDNet

Rumor has it, IBM is looking at buying Sun. No surprise that we’re seeing consolidation in a down market, but will this mean consolidation in the open source space?

I’ll let others speculate on the affect it might have on the hardware market, but I’m curious what would happen to the open source operating system ecosystem. Would IBM keep trying to build a separate OpenSolaris community, or put all the weight behind Linux?

The two communities can (and do) exist side-by-side, and Sun’s contributions to FOSS projects like GNOME benefit the entire FOSS ecosystem - not just OpenSolaris. Sun doesn’t have the same conflict of interest that IBM would, though.

Would IBM continue to support Linux if it had a second open source operating system to look after? In trying economic times, one has to wonder. IBM has been a staunch supporter of Linux, but the company has also dabbled in OpenSolaris, and still maintains AIX. From the corporate viewpoint, it might seem to make more sense to back either Linux or OpenSolaris, rather than maintaining AIX, OpenSolaris, and putting support into Linux as well.

Linux and OpenSolaris are both free *nix operating systems, so why does it matter if IBM goes the OpenSolaris route? It comes down to control: No single vendor controls Linux’s destiny. Red Hat, Novell, Canonical and all of the other vendors participating in Linux development have limited control over development, and their customers have plenty of options.

Even the Linux Foundation is merely a steward for some of the community’s resources, and doesn’t control the direction of the kernel or the larger software ecosystem that make up Linux distros.

Customers have their choice of Linux vendors, contributors have their choice of projects to contribute to. That’s not really true of OpenSolaris. For Solaris/OpenSolaris, there’s really only one game in town. True, a few OpenSolaris derivatives have popped up, but none have the resources of a major company or large project behind them. Backing OpenSolaris means putting a lot of trust in the company behind it. True, the community or a competitor could fork OpenSolaris, but bootstrapping that sort of thing would take time and a lot of effort.

And for IBM, OpenSolaris would require a lot more manpower in the long run. It seems that it would make more sense for Big Blue to provide a migration path for Solaris customers to Linux.

It’s all speculation right now, but if the deal goes through, I hope IBM signals its intentions early on.

Why Big Blue Sun Makes Sense

Originally Posted at ZDNet

IBM is reportedly in talks to buy Sun Microsystems for $6.5 billion and the deal is long overdue. The companies mesh on the open source software front, Sun is struggling and IBM can consolidate some server market share.

First, the headlines. The Wall Street Journal is reporting that IBM could acquire Sun as early as this week (Techmeme). IBM would pay all cash for Sun. The Journal also reported that Sun has approached a number of large companies about an acquisition; a move that throws cold water on CEO Jonathan Schwartz’s everything is fine video.

Dana Gardner counterpoint: IBM buying Sun Microsystems makes no sense, it’s a red herring

Behind the scenes here, we’ve frequently had chats about how IBM would take out Sun. The only real debate was whether Big Blue would acquire Sun in parts or as one sum. The working assumption was that Sun would be broken up and sold in parts, but the IBM deal also works nicely. Here’s why the deal makes some sense:

IBM can acquire server and storage share. Sun still has a lot of hardware on the market in key verticals such as finance and telecom. The problem is that Sun is reliant on U.S. sales and that’s not a fun place to be right now. With Cisco entering the server market the profit margins could be squeezed—especially if the server essentially becomes a storage and networking box too. By acquiring Sun, IBM gets more scale so it can endure the margin squeeze. That same argument holds for storage hardware too.

There are issues to be worked out on the hardware side though. IBM has refrained from commodity servers and Sun plays in that space. Meanwhile, servers run on different chips–Sun has Sparc and IBM has the Power architecture.

The time is now. IBM is a software and services company, but it needs hardware, which would be roughly a third of revenue with Sun, to sell its other offerings. Hardware is often the entry point for IBM’s software and services. With a stronger hardware business it can fend off HP in the marketplace.

Sun is a powerhouse in Unix, which is still a key platform, but isn’t exactly gaining in the market these days. IBM could acquire Sun and establish two key beachheads: Linux and Unix. The former will ultimately take over for the latter in the data center. IBM can play both and sell you the services to migrate while it’s at it. Bonus for Big Blue: Sun would enable it to pressure HP’s Unix-based businesses too.

One problem: IBM sells AIX Unix servers. Sun sells Solaris (hat tip to a reader pointing that out).

Sun has to do something. Sun is a company that has to transition a legacy hardware business to one modeled more on open source software and services. That’s a wrenching change that may not work out. An exit ramp makes sense right now. Besides, Sun was reportedly turned down by HP and Dell was mum.

This about HP NOT Cisco. The initial headlines will paint IBM’s move as a reaction to Cisco’s entry into the data center. The reality is HP is the target. HP acquired EDS to directly take on IBM. IBM is returning the favor by squeezing HP on hardware.

Open source software. Sun’s future is offering an open source stack of software led by MySQL at its core. IBM is all about open source. The two together make a lot of sense and IBM could pull MySQL, Lotus, OpenSolaris and other parts together in a nice stack. In addition, Sun’s open source software needs distribution—it recently did a deal with HP. IBM has distribution galore. Matt Asay has a good post on how IBM can monetize open source.

One problem: There’s a lot of software overlap here. In databases, IBM has DB2 and Sun has MySQL.

Java. Java is arguably Sun’s best asset, but the platform was never monetized. Perhaps IBM will have better luck.

Cloud computing. Sun has some interesting ideas on cloud computing and its plans could work. Sun has also made targeted cloud computing acquisitions. Meanwhile, Sun has a cloud computing press conference Wednesday morning, a shindig that will be dominated by IBM talk now. A few folks seemed to buy that Sun-as-cloud-player marketing, but it really looks like a relabeling to me. IBM could absorb Sun’s plans in its big cloud services offering. Also see: Handicapping cloud computing: The big picture.

It’s about consolidating the data center. Data center managers will want fewer throats to choke and Cisco isn’t going to make life easier. Sun can allow IBM to consolidate a data center rival and bring things back to equilibrium now that Cisco has entered the market.

What could go wrong? A few items. For starters, there are regulatory concerns. Who knows whether the Obama administration would approve this deal. IBM would have roughly 42 percent of the server market with Sun, according to IDC. HP, however, would be second wind 29.5 percent. With Dell a strong No. 3 with 11.6 percent share the IBM-Sun deal should pass scrutiny. But it is a wild-card.

Here’s a look at the server market share standings:

And then there’s culture. If you want to know the big cultural difference look no farther than Schwartz’s ponytail vs. IBM’s typical look. IBM is all business and Sun is sort of business with a lot of Silicon Valley shtick. That said Sun’s workers may find themselves relieved by the IBM deal. Sun’s upcoming struggles are fairly obvious and IBM looks like a great option for those that choose to look ahead.

Update: Sun shares had a predictable response to the news, soaring 72 percent in premarket trading.

Update 2: Pondering the valuation: As of its most recent quarter, Sun had $2.6 billion in cash, equivalents and short-term marketable debt securities. So the rest of the business is worth $4 billion roughly. One working theory is that IBM would potentially buy Sun and sell the hardware business to Fujitsu, a close partner of Sun. IBM could license Solaris, since it would own the code, to Fujitsu. Assuming IBM does sell some hardware assets to Fujitsu for $1 billion or so the Sun acquisition doesn’t look so large.

Meanwhile, analysts are mixed on the deal. UBS analyst Maynard Um says in a research note:

Our Sun thesis has been that there is a potential restructuring story given relative inefficiencies. We do think IBM would be in a position to take out cost more quickly, however, we expect Sun revs to continue to be pressured in FY09 & FY10 given its reliance on high end servers and limited ability to monetize its software. And while IBM is certainly financially capable of purchasing Sun, we would note that a $6.5bn acquisition would be large even by IBM’s standards, and would also be a deviation from IBM’s current strategy of tuck-in acquisitions.

Final Chapter For Sun Micro Could Be Written By IBM

As Originally Posted at The Wall Street Journal

Sun Microsystems Inc. has been at the leading edge of some of the biggest trends in computing since the 1980s. But the Silicon Valley company has often lagged behind at making money from them.

Now the time to do so may be running out for Jonathan Schwartz, the brainy software specialist who became Sun's chief executive in 2006.

The disclosure of talks for Sun to sell itself to International Business Machines Corp. caused Sun's stock to jump nearly 79% Wednesday to $8.89 on the Nasdaq Stock Market.

If the deal does go through, IBM is likely to pay $10 to $11 a share for Sun, according to people familiar with the matter. That would put the purchase price around $8 billion -- or about $6.5 billion including the $1.4 billion in cash on Sun's balance sheet.

While negotiations are under way, a transaction might not occur and the talks could fall apart, these people said.

Mr. Schwartz declined to comment through a Sun spokeswoman, who characterized the reported talks with IBM as "rumor and speculation" that the company would not discuss.

But there is no debate that a sale to IBM would mark an inglorious end to an industry leader that once boasted it put "the dot in dot-com" and reached a market value of $205 billion during the Internet bubble.

Under Scott McNealy, Mr. Schwartz's predecessor, Sun exemplified an era in which big companies could be built by giving engineers the freedom to chase new ideas. That management philosophy now seems an endangered species, as competition, slowing sales and other forces create consolidation pressures and a focus on profitability.

Sun, a major maker of computer server systems, has suffered disproportionately from the recession because of a reliance on high-end systems sold to the hard-hit financial industry. But some customers, former Sun executives and analysts said management mistakes contributed heavily to Sun's problems.

Among the biggest was a belated move to adopt low-cost servers that use so-called x86 chips from Intel Corp. and Advanced Micro Devices Inc., instead of chips called Sparc that Sun designed.

Some once-loyal Sun customers, such as the online software company Salesforce.com, said they saved big money by adopting alternatives; the San Francisco company chose to move to x86 servers supplied by Dell Inc.

"Sun's culture is not really about the customer -- it's more about them and their technology and their engineers," said Marc Benioff, Salesforce.com's chief executive, in a recent interview.

Sun, founded in 1982, first shook up the market for computer workstations -- single-user machines favored by engineers, product designers and others that need intensive computing capability.

The company came out with low-priced, powerful workstations that were designed by co-founder Andreas Bechtolsheim. They ran a type of industry-standard software called Unix that was adapted by Bill Joy, another Silicon Valley technologist.

Mr. McNealy, who remains Sun's chairman, provided the management skills, helping the company to outmaneuver larger competitors and later execute a shift into the market for server systems.

Some of Sun's inventions continue to have an impact. The idea of publishing software specifications, which helps prevent customers from being locked into a supplier, is now embodied in "open-source" software such as Linux.

At times, Mr. McNealy and other Sun executives showed a tendency to deride other companies' technology. Sun became a major Microsoft Corp. critic and legal opponent, until Microsoft in 2004 agreed to pay Sun nearly $2 billion to settle an antitrust case and other disputes.

Mr. Schwartz was promoted from chief operating officer to CEO as Sun was struggling to regain its early Internet-era growth. Many observers saw him as a positive force, a view bolstered when he acknowledged past mistakes. He has pushed to offer open-source versions of Solaris, its popular Java programming technology and other products.

But some other moves promoted by Mr. Schwartz have been panned, including Sun's $4.1 billion purchase of tape-drive maker Storage Technology Corp. in 2005, a business seen as slow-growing.

The $1 billion Sun paid in 2008 for MySQL AB, maker of a popular open-source database program, was also characterized by some analysts as excessive.

Ulf Michael Widenius, a MySQL co-founder who recently decided to leave Sun, praises Mr. Schwartz's vision but said he hasn't been able to fix Sun's bureacratic middle-management structure. "He knows what the right way is, but it is simply not done," Mr. Widenius said.

Mr. Schwartz tried to juice up Sun's image with investors,and launched a one-to-four reverse stock split. But neither did much for Sun's shares, which fell 70% in 2008 before the stock-market meltdown accelerated last fall.

Meanwhile, the company gained some more powerful shareholders, including Kohlberg Kravis Roberts & Co., Relational Investors LLC and Southeastern Asset Management Co.

The latter is now Sun's largest stockholder, with more than 20% of its shares, and negotiated the right to designate two Sun board members. A spokeswoman for Southeastern declined to comment Wednesday.

In response to slowing sales, Mr. Schwartz ordered the latest in a series of restructurings last fall, designed to reduce Sun's headcount by 15% to 18%.

Meanwhile, certain Sun investors began pressing board members about six months ago to find a suitor because the company had "a huge cost structure that they don't understand," said one person familiar with the situation. Talks with tentative buyers "intensified this year," this person said.

Besides flirting with Hewlett-Packard Co., Sun officials also approached Dell. IBM was an attractive buyer because "IBM has better controls [and] better management," this person said.