Storage Technology Corp. scouted for a buyer several months before agreeing to be acquired by Sun Microsystems, industry analysts say.
Sun Microsystems’ $4.1 billion all-cash deal to acquire StorageTek earlier this month was not a total surprise to industry observers who said chief executive Patrick J. Martin was “shopping” the Louisville-based company.
“We knew the company was evaluating its strategic options, and Sun had an interest,” said Thomas Curlin, a storage analyst for RBC Capital Markets. “I’m sure they talked to a broad range of people.”
Curlin first noted StorageTek’s interest in being acquired in an April research report: “Multiple industry contacts indicate that StorageTek is courting potential suitors,” he wrote.
Kaushik Roy, equity analyst for Susquehanna Financial Group in Boston, said StorageTek reportedly talked to EMC, a Hopkinton, Mass.-based disk-storage company, before coming to terms with Sun. EMC turned the company away, he said.
“It’s the chatter in the industry,” he said of StorageTek’s seeking an acquirer. “It’s been going on for the past year.”
StorageTek said that its low debt and more than $1 billion in cash reserves fueled speculation that it would be acquired. However, it disagreed with the characterization the company was being shopped.
“Those two things combine to create a very attractive balance sheet,” StorageTek spokesman Jeremy Story said.
Although Story wouldn’t say which companies StorageTek talked to, StorageTek is “constantly on the lookout for opportunities.”
“As a matter of normal business, we have conversations with companies about all kinds of relationships,” he said. “Martin has an obligation to do what’s best for our shareholders, and a part of that would be to listen to any offer that was made.”
EMC wouldn’t confirm that it was in discussions with StorageTek, but it said some of its customers want to back up data on tape.
EMC deals primarily in disk-based storage, and last year it struck a reseller agreement with Redmond, Wash., tape-storage company Advanced Digital Information Corp.
Brian Babineau, an analyst for Enterprise Strategy Group in Milford, Mass., agreed that StorageTek was entertaining a number of options, but “it’s hard to say they had a for-sale sign sitting on their front lawn.
“I know that StorageTek and EMC talked about a reseller agreement,” he said.
With so much cash on hand, StorageTek also had the opportunity to buy a company that would broaden its reach in the storage market.
“It’s the same meeting with the investment bankers: We need to buy someone or get bought,” Babineau said. “Any executive that’s looking out for shareholders should be open- minded about making acquisitions or being an acquisition target.”
Staff writer Kimberly S. Johnson can be reached at 303-820-1088 or kjohnson@denverpost.com.
