AT&T; to Sell Most of Its 19% Stake in Sun Microsystems
American Telephone & Telegraph said Monday that it will sell virtually all its 19% stake in Sun Microsystems, ending one of the most financially rewarding and technology-advancing relationships in the computer industry.
AT&T; said it took the action because its pending acquisition of NCR Corp. will probably put the phone giant and Sun into direct competition in the computer business.
It will sell 5 million of its 19.1 million shares for $36.25 each back to Sun, where they will be used to fund the Mountain View, Calif.-based company’s employee benefit program. AT&T; will sell an additional 11 million Sun shares at the same price to Salomon Bros., where they will be resold to institutional investors. The remaining shares will be sold later.
The initial sales, AT&T; said, will produce a combined pretax profit of $137 million. Sun shares closed at $36.50, down 37.5 cents in active trading on the over-the-counter market Monday, while AT&T; shares closed at $36.875, down 25 cents on the New York Stock Exchange.
The sales will bring to an end one of the closest alliances in the computer industry, a relationship that stirred up resentment, competition and ultimately acceptance of AT&T;’s Unix operating system, which controls the operations of powerful desktop computers.
Immediately after its initial investment in Sun in early 1988, the companies announced that they would jointly develop and write a unified version of AT&T;’s Unix. Before the effort could get under way, Sun’s competitors, including Hewlett-Packard, Digital Equipment, International Business Machines and more than a dozen others, launched a rival effort on a uniform Unix program.
The dual efforts, known among computer industry insiders as the “Unix Wars,” heightened the visibility of the otherwise obscure Unix program. That helped it become a cornerstone of the “open systems,” off-the-shelf approach to computer manufacturing, where different systems from different manufacturers are compatible.
The Unix version from Sun and AT&T;, known as Unix System V, Release 4, is now widely accepted as a standard computer operating system.
Although Unix development was a key objective of AT&T;’s investment in Sun, another was to strengthen Sun, then a young, cash-starved computer workstation maker up against such established rivals as Digital Equipment and Hewlett-Packard.
AT&T; and Sun, which has become one of the nation’s hottest-performing computer makers, said their primary missions have been accomplished. Further, they noted that the close equity relationship is no longer appropriate, given AT&T;’s planned purchase later this year of NCR, the nation’s fifth-largest computer maker.
“Both companies have benefited from the relationship,” said Robert M. Kavner, AT&T; group executive for data systems and federal systems.
Scott McNealy, Sun’s chairman, said his company was pleased with the outcome of AT&T;’s investment. “Our relationships with AT&T; in many areas remain strong as a customer, supplier and technology partner, but with the acquisition of NCR by AT&T;, we both believe the equity relationship is no longer appropriate.”
Kavner said the companies would continue to buy products from each other and that Sun would keep its recently acquired stake in Unix System Laboratories Inc., the AT&T; subsidiary that controls Unix development.
