Sun Chief Receives 1.5 Million Options
Network computer maker Sun Microsystems Inc. granted stock options to a number of senior executives, including Chairman and Chief Executive Scott McNealy, according to regulatory filings made Monday with the Securities and Exchange Commission.
Sun, whose servers run corporate networks and Web sites, granted McNealy options for 1.5 million shares with an exercise price of $3.85, the closing price on July 23 when they were issued.
McNealy, the company’s co-founder, may exercise the options in five equal annual installments of 300,000 shares beginning July 23, 2004.
The options were granted to McNealy and other executives under Sun’s 1990 Long Term Equity Incentive Plan, according to the filing.
Last week, shares of Sun fell 19% after it reported quarterly earnings below Wall Street expectations and analysts wondered when it might recover from the technology spending downturn.
Santa Clara, Calif.-based Sun last week reported an 80% decline in profit to $12 million for its fiscal fourth quarter on a 13% decline in revenue to $2.98 billion. It has suffered more than rivals from the drop in tech spending, partly because its biggest markets -- telecommunications and financial services -- have been particularly hard hit the last three years.
The company also has been pressured by rivals IBM Corp., Hewlett-Packard Co. and Dell Inc.
Sun, whose server computers had been losing market share to less expensive machines made by Dell, two months ago introduced two servers that it hoped would turn the situation around.
As for stock options, under current standards, companies are not required to treat them as a regular cost of business. That practice is being reviewed by accounting standards bodies amid investor concerns about lavish executive option packages.
Sun is one of a number of companies that counts on options grants to help lure and retain employees, and McNealy has criticized the push to revise the practice.
Some technology companies have fought back against proposals to expense stock options, arguing in part that the move could make it harder for investors to understand a company’s true operating costs because of difficulties in valuing such options.
Sun also granted Chief Financial Officer and Executive Vice President Stephen McGowan options to acquire 500,000 shares at the same $3.85 exercise price that McNealy was offered. McGowan’s options vest in five annual installments of 100,000 shares beginning July 23, 2004.
Other executive vice presidents granted options for 500,000 shares were Jonathan Schwartz, who runs Sun’s software group; Mark Tolliver, head of marketing and strategy; and Patricia Sueltz, head of Sun’s computer services unit.
Shares of Sun fell 7 cents to $3.90 on Nasdaq. The stock has fallen from its September 2000 peak of more than $64 but has gained 25% this year.
