January 25, 1996
Sun Values Apple Far Below Market Price
By JOHN MARKOFF
un Microsystems wants to merge with Apple Computer, but it thinks Apple is worth far less than its current market price.
Sun offered only about $2.76 billion, or $23 a share, for Apple, according to several people familiar with the negotiations at both companies, far lower than the $4 billion indicated in published reports this week.
Reports began circulating in Silicon Valley's investment banking community Wednesday that the talks had collapsed, but those reports could not be confirmed.
Besides the low offer -- more than $9 a share less than Apple's closing price in Wednesday's stock market trading -- there were reported concerns over melding the corporate cultures of the companies that have long been neighbors but have had significantly different approaches to the high-technology industry.
Neither company has commented on the negotiations, which have taken place over the last several weeks.
Sun's offer was much lower than the $33-a-share price that The Wall Street Journal Wednesday said was imminent.
Even if was only a negotiating ploy, the bid suggests that while Sun's executives believe that it would be possible to integrate the quirky personal computer maker into its business strategy, they consider Apple to be in worse financial shape than is generally believed on Wall Street.
Apple closed Wednesday at $32.25, up 62.5 cents.
Apple, based in Cupertino, Calif., last week reported a $69 million loss for its first fiscal quarter -- usually its strongest -- and said it would cut at least 1,300 jobs.
The proposed offer was in the form of a stock swap and would have left Apple shareholders with stock in the combined company. Thus it could have been argued that, despite the low price, Apple investors would be in a position to benefit if Sun managed to turn Apple around.
It is not clear when Apple's management learned just how little Sun was willing to pay. The extremely low offer suggests that Sun's executives believed that Apple's management was deeply concerned about the company's plight and might be willing to accept a fire-sale price.
Apple's share price had been falling before the disclosure of the talks late last week, dropping below $30. But the shares had not traded for as little as $23 since October 1993, a few days before the former chief executive John Sculley, resigned.
Copyright 1996 The New York Times Company