Massucci's Take: Sun reminds IBM it's interested, is IBM listening?
It's a story of a company with lots of money to invest (IBM, Microsoft), wanting to buy a company (Sun, Yahoo) that has seen its growth stall and appears to be in need of a buyer with lots of cash.
It's a story that may have a similar ending: Smaller company winds up chasing larger company after initially rejecting interest. In business there's rarely a fairy-tale happy ending.
What companies like Sun and Yahoo may not realize when dealing with larger companies is that big companies have huge egos. They don't like being rejected. Once publicly scorned, they are likely to walk away.
When you get a chance to join the varsity and you say no, you don't usually get asked again.
The problem with the smaller companies in cases such as this, is, they also have large egos. After all, they didn't get to be the sizes of Sun and Yahoo without some strut. Because of that swagger, they gain an inflated sense of value.
In business, you're worth what you negotiate you're worth. As I noted on April 6, few will pay Porche prices for a Chevy. No matter how souped up that Chevy may be. You could argue that Microsoft was offering Porche prices for Yahoo last year. Yahoo co-founder Jerry Yang was forced from his role as CEO after saying no to the generous offer.
Almost two weeks ago, Sun reportedly rejected IBM's offer to buy the company because they wanted better terms. The offer was generous, but the terms were not exactly what Sun was looking for, so Sun said no.
Today, Sun Microsystems is telling IBM they'd be willing to resume talks, according to a Bloomberg story, if those offer terms improve.
Sun is asking for terms IBM may not be willing to offer. Why not? Because they don't have to.
No one else is bidding for Sun and, as I wrote on Daily Finance on April 6, Sun is not negotiating from a place of strength.
If IBM doesn't sweeten the terms of the reported $7 billion offer, Sun shareholders will be left disappointed. Just as Yahoo shareholders were left with a pot -- gold removed, thank you -- after last year's failed talks with Microsoft.
When Microsoft made its $44.6 billion bid for Yahoo, the search company held out for more. Microsoft offered more and Yahoo again said they wanted more. Microsoft, having been twice rejected, told Yahoo to have a nice day.
IBM, once rejected, may also tell Sun to take a hike.
In hindsight -- and at the time -- Yahoo looked dumb and greedy for not jumping at Microsoft's improved offer to $33 a share, from it's initial offer of $31 a share. Yahoo (YHOO) shares closed at $14.02 on April 15.
Sun shares, which are up more than four percent today, may also be looking at a depressed valuation if IBM walks away from this deal.
It's a story all too familiar. What looks, from the outside, to be a no-brainier idea doesn't happen because in business, just as in life, sometimes ego gets in the way.