Sun rises on acquisition speculation

SAN FRANCISCO — Shares of Sun Microsystems, which have fallen 92 percent in the past three years, rose 12.3 percent on speculation the company might be bought by a larger computer rival, an analyst said.

Sun rose 41 cents to $3.75 yesterday. About 131 million shares were traded, making Sun the most actively traded U.S. stock. Trading was more than two times the three-month average and the highest since July 19, when 223 million shares changed hands.

Investors are speculating that Dell, IBM or Hewlett-Packard may acquire Sun, said Giga Information Group analyst Rob Enderle.

Sun, which sells server computers that run corporate networks and Web sites, saw sales decline 32 percent in the 12 months ending in June, and analysts surveyed by Thomson Financial are forecasting revenue to fall 8 percent this year.

"Sun is cheap enough and when a company gets down to that level acquisitions do get increasingly likely," Enderle said. "Every time there's a large rumor about an acquisition, the stock reacts."

Sun spokeswoman Diane Carlini declined to comment.

Of the three rumored suitors, IBM would be the most likely buyer, Enderle said. Dell Chief Executive Michael Dell tends to shun acquisitions and has built his business on displacing Sun products, making Dell a less-likely candidate, Enderle said.

Hewlett-Packard still is integrating its $18.9 billion acquisition of Compaq last year, and probably is uninterested in making another large purchase anytime soon, Enderle said.

IBM spokesman Joe Stunkard and Hewlett-Packard spokeswoman Rebeca Robboy declined to comment on whether their companies are interested in Sun. Dell spokesman Mike Maher didn't return phone calls.

Sales of servers based on chips made by Intel and the Linux and Microsoft Windows operating systems have grown faster than Santa Clara, Calif.-based Sun's machines in the past couple of years. Corporate customers, looking to save money, perceive Sun gear as more expensive to buy and maintain, analysts have said.