Sun Microsystems, Inc. Investor Investigation

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Company Name(s): 
Sun Microsystems
Affected Securities: 

After rumors of a potential deal between Sun Microsystems, Inc. and IBM, Sun Microsystems, Inc. (NASDAQ: JAVA) and Oracle Corporation announced yesterday that they have entered into a definitive agreement under which Oracle will acquire Sun common stock for $9.50 per share in cash. An investigation on behalf of current shareholder of Sun Microsystems, Inc (NASDAQ: JAVA) over possible breaches of fiduciary duty by the board of directors of Sun Microsystems, Inc. was announced.

According to the investigation by a law firm the investigation focuses on potential shareholder claims concerning breaches of fiduciary duty by Sun’s board of directors arising out of their attempt to sell Sun to Oracle at an “unfair price” for Sun shareholders. According to the investigation the transaction with a price of for $9.50 per share in cash appears to be unfair given the fact that, among other things,the stock of Sun Microsystems (NASDAQ: JAVA) was trading as high as $10.86 on August 15, 2008 and $16.32 on May 01, 2008. The transaction is valued at approximately $7.4 billion, or $5.6 billion net of Sun’s cash and debt. Oracle President Safra Catz reportedly said that “we expect this acquisition to be accretive to Oracle’s earnings by at least 15 cents on a non-GAAP basis in the first full year after closing. We estimate that the acquired business will contribute over $1.5 billion to Oracle’s non-GAAP operating profit in the first year, increasing to over $2 billion in the second year. This would make the Sun acquisition more profitable in per share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft and Siebel combined”.

The Board of Directors of Sun Microsystems has unanimously approved the transaction. It is anticipated to close this summer, subject to Sun stockholder approval, certain regulatory approvals and customary closing conditions. According to a poll by the Shareholders Foundation, Inc., an investor advocacy group that does research to shareholder issues and inform investors of securities class actions, settlements, judgments, and other legal related news to the stock market, 22% of the participants of a poll about what price would be fair to Sun Microsystems investors in case of a potential merger the majority of the participants think that a price of $13-16 per share for Sun Microsystems is fair.

7% favor a price between $4-$8 6% , 19% favor a price between $9-$12, 13% favor a price between $17-$20, 15% favor a price between $20-$24, 7% favor a price between $25-28, and 18% think the price should be over $28. Sun Microsystems had total revenue of $13.88Billion last year with a net income of 403Million. Sun Microsystems, Inc. is located in Santa Clara, California and provides network computing infrastructure solutions. Sun offers core brands, such as the Java technology platform, the Solaris Operating System, the MySQL database management system, Sun StorageTek storage solutions and the UltraSPARC processor. Shares of Sun Microsystems (NASDAQ: JAVA) traded on Friday at $6.68 per shares after they declined from the rumor talks with IBM on March 18, 2009 with a share price of almost $9 per share. Since the announcement of the acquisition Sun is trading at $9.16 per share, still substantially down from last year with $17.48 per share and over $25 in 2007. Sun Microsystems shares reached a price as high as $257.25 in 2000.