Editorial

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I had also mentioned Sandell Asset Management's (SAM) acquisition of a significant portion of Sybase stock and their demands that Sybase do more to provide more value to stockholders. Since then, SAM has notified Sybase that they intend to nominate three candidates for the board of directors:

• Nick Graziano, a managing director of Sandell Asset Management Corp
• John McFarlane, a board member and the interim president and chief executive at Exar Corp.
• Jonathan Macey, a Sam Harris professor of Corporate Law, Corporate Finance and Securities Law at Yale Law School

It looks like a proxy battle may be shaping up. According to a number of news sources, Sybase hired Merrill Lynch to help them evaluate alternatives in order to respond to SAM's original October letter, but so far no public movement has been made. The perceived lack of action may result in SAM taking further steps (such as the proxy battle) to force Sybase into action.

Meanwhile, I had also mentioned the unsolicited offer that Oracle had made for BEA and the rumors it had generated that Sybase might also be a takeover candidate. I hadn't expected the BEA sale to happen. Well, it appears that Oracle established what BEA was, and they just needed to settle on the price. They settled for $8.5 billion. Meanwhile, Sun announced that they had purchased MySQL for $1 billion. (Of note, MySQL CEO Marten Mickos did confirm that Oracle had attempted such a purchase as well in 2006.) In any event, the sale had Joshua Greenbaum of ZDNet (http://blogs.zdnet.com/Greenbaum/?p=146) wondering why Sun hadn't spent an extra billion and purchased Sybase instead. Ed Mullane of the Financial Times (Click Here !) quoted an industry banker as referring to Sybase as "a fourth competitor in an industry that really only needs two," suggesting that they should have banker rather than an investment advisor, and indicating that he believed that Sybase's acquisition by one of the big three (Oracle, Microsoft or IBM) would pass regulatory muster because Sybase's small market share means the sale would not materially impact the competitive dynamics of the industry.

As Eric Lai of ComputerWorld notes (http://blogs.computerworld.com/why_john_chen_should_fear_a_boardroom_battle_over_sybase): "What's good for a shareholder isn't always good for the long-term health of a company." I'm not enthusiastic about the impact of an acquisition. However, the industry sector is going through consolidation, and I'm also concerned that those who don't get acquired by a major player will be marginalized and end up not being a player at all. So, interesting times indeed. Stay tuned...

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