Sun CEO blasts buyout rumour

Sun Microsystems CEO, Scott McNealy, is disparaging a report that suggests an investment firm is planning a leveraged buyout of the server and software company.

McNealy called the report a "totally unsubstantiated rumour" and part of a scheme to profit from a stock price boost.

On Friday, BusinessWeek quoted an unnamed hedge fund manager as saying McNealy is considering taking Sun private with the aid of Silver Lake Partners: an investment firm that bought out Seagate Technology and eventually relaunched it as a publicly traded company. According to the BusinessWeek report, the manager foresees a price of $5 to $5.50 per share, well above $3.44 the stock closed at on Thursday.

In an email on Friday, McNealy said the rumour is part of a scheme to profit from an increase in Sun's stock price, which had risen 36 cents, or 11 per cent, at 08:00(PT). The stock had traded higher earlier on Friday.

"Why would a supposedly credible rag like BusinessWeek quote an anonymous hedge fund guy on a totally unsubstantiated rumour designed to spike the stock price?" McNealy said. "I will bet this hedge guy is laughing his butt off that BusinessWeek printed this as he profits from the $0.42 rise in the price this morning."

Sun has stopped the deep revenue declines that plagued it for years after its fall from dot-com glory, but the California-based company is still suffering from mostly flat revenue and breakeven profitability.

Stephen Shankland writes for CNET News.com