Sun’s major shareholder is getting cranky

Looks like someone’s ponytail, and the head it’s attached to, may be heading for a chopping block. Jack Davis, a blogger for the San Jose Mercury News, has a report that Sun Microsystems’ largest shareholder, Southeastern Asset Management, appears to be losing patience with with the company.

Sun announced preliminary numbers on Monday, stating that it would fall short of revenue projections and report another loss, possibly a sizable one. The next day, Sun’s shares fell almost 20 percent.

Southeastern has converted its reporting of Sun holdings from a 13G filing to a 13D, “in order to be more active in corporate governance and management matters, and to have the ability to enter into discussions with third parties concerning proposed corporate transactions of a significant nature.”

The difference between the two filing statuses is that 13G is for a company that owns a sizable percentage of a firm, more than 5 percent, but takes a passive role in the company’s affairs. A 13D is for investors with sizable holdings who plan to get more involved in the affairs of the company.

Like kicking out c-level executives.

Southeastern has been buying up Sun shares even as they were dropping in value, spending $171.7 million to buy 21.2 million shares at prices ranging from $10.01 a share Aug. 22 to $5.67 a share as late as Monday.

There have been rumors that Schwartz is in trouble for some time, and we did look into them. The consensus was he inherited a mess and had a lot of work ahead of him. But Southeastern may not look at it that way.

Davis noted that in a letter to shareholders in June, Southeastern explained away some of Sun’s quarterly problems and said, in part, “We have confidence in [CEO] Jonathan Schwartz and his team and applaud their substantial share buybacks as well as their strategy for creating competitive advantage through open systems.” There was no reiteration of such sentiments was made in the most recent SEC filing.

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