Intel CEO Weighs in on IBM-Sun Talks

Paul Otellini

It pays to shop around, an old adage has it. What about shopping yourself around?

The question springs from the IBM-Sun Microsystems takeover talks, and some comments about the situation by Intel’s chief executive officer that reached the public record in a roundabout way. Paul Otellini on Monday was addressing the chip maker’s employees about a plan to exchange Intel stock options, and a transcript of his question-and-answer session was included by the company in a Securities and Exchange Commission filing.

One employee asked about the buyout and possible motivations for it, and Otellini opined that it was likely Sun’s low stock price that spurred interest in the Silicon Valley company.

“I can tell you that Sun was shopped around the Valley and around the world in the last few months,” Otellini added, according to the transcript. “A lot of companies got calls or visits on buying some or all the assets of the company. It looks like IBM is in the hunt now. And at a hundred-and-some-odd percent premium, I suspect they’ll get it.”

Few companies–or sellers of houses for that matter–like to be seen as really eager to find a buyer. They would rather be seen as hotly pursued; for one thing, competition among buyers could help boost any sales price. No matter what the situation, though, it is standard practice for companies to consider multiple options to seek the most lucrative outcome.

A company’s competitors, of course, could conceivably like to create a perception that a rival is desperate to throw in the towel and find a buyer. Otellini’s remarks can’t be faulted on that score; Sun is a major customer for Intel, as is IBM, so there is no obvious vested interest in saying anything negative about either of them. He ends his discussion of the matter by asking himself rhetorically if IBM buying Sun would be good or bad for Intel.

“I don’t know,” he answered. “I’d rather have Sun be independent I guess.”

Sun has not discussed the deal talks. But a spokeswoman said, in response to Otellini’s remarks, “as a public company we are always having conversations about what is best for our shareholders.”

As for the potential benefits of the deal to IBM, Otellini mentions the notion of consolidating the two companies’ positions in Java software–a technology invented by Sun–and the notion of IBM trying to get users of servers based on Sun’s Sparc chips to shift to machines using IBM’s Power chips. “I think IBM is trying to consolidate architectures,” he said.

An Intel spokesman declined to elaborate on Otellini’s remarks. Am IBM spokesman declined comment.