Apple expected to call off talks on Sun buyout plan


New York

Talks between Apple and Sun Microsystems on a buyout plan that would have in effect merged the world-famous Apple name out of existence are expected to be formally suspended today in the wake of the appointment late last Friday of Gilbert Amelio as the company's new chief executive and chairman.

Sources close to Mr Amelio, who comes to Apple from National Semiconductors where he has been chief executive since 1990, say he is likely to attempt in the short term at least to solve Apple's manifest problems from the inside and while retaining its independence. Mr Amelio replaces Michael Spindler, chief executive since 1993, who has received most of the blame for Apple's recent difficulties.

The change of the guard at Apple was confirmed by the company late on Friday, hours after the close of markets and a full business day after it was foreshadowed in several US newspapers. Rumours of the impending ousting of Mr Spindler prompted a small rally in Apple shares which closed higher on the Nasdaq market at $29.50 on Friday evening.

The price for spurning Sun Microsystems, which had been in talks with Apple since last Autumn, is likely to be swift action by Mr Amelio to restructure the company, probably entailing new redundancies on top of the 1,300 job losses announced by Mr Spindler last month.

The crisis at Apple sharpened early last month when it reported a $69m loss for the quarter ending 29 December which included the Christmas retailing period and should have been strong.

The company, which last week saw its credit rating downgraded to junk status, has also warned of additional red ink in the first quarter this year.

Even as recently as 10 days ago at a raucous annual meeting of shareholders, the Apple board defended Mr Spindler, even though he came under fierce attack at the meeting from some important institutional investors. But board members began to question the wisdom of hanging on to Mr Spindler at a secret crisis meeting in a New Mexico hotel the next day.

The merger option also became less attractive as Apple's share value continued to sink. Last week, Sun Microsystems was reported to have proposed a straight stock-swap transaction that would have valued Apple at a meagre $23 a share.

Apple board members were put off, in part, because of fears that selling the company for so low a price might have triggered an avalanche of shareholder law suits.

If the Sun Microsystems deal could not be done, the sacking of Mr Spindler came to be the only remaining option for the board. The crunch came at another secret board meeting at the St Regis Hotel in Manhattan last Wednesday. It remains unclear whether Mr Spindler had to be pushed, or if he resigned voluntarily. He suffers from a heart condition and his wife has cancer.

The board chairman, Mike Markkula, meanwhile volunteered to become vice- chairman and surrendered his chairmanship to Mr Amelio, thus giving him full control.

Among those predicting that Mr Amelio will kill all takeover talks, is Regis McKenna, a Silicon Valley publicist and venture capitalist who originally iniatiated contacts between Apple and Sun Microsytems. "Gil thinks he can fix Apple's manufacturing problems," Mr McKenna told the New York Times yesterday.

Wall Street is expected meanwhile to cheer the appointment of Mr Amelio who has a reputation as a corporate "turnaround artist". He has been credited with the virtual rescue of National Semiconductors which was on the verge of oblivion when he took control of it.

Robert Herwick, of Herwick Capital Management in San Francisco, said: "The pump speed [at Apple] has picked up, so the ship isn't sinking at the moment, but it still has holes under the waterline."

Rick Whittington, of Soundview Financial in Stamford, Connecticut, said: "Amelio is a Mr Fix-it. Obviously Apple, according to its stock market price, needs fixing."

Mr Amelio has several options for restructuring at Apple where executives have been keen to focus on software.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower