Sun Microsystems( JAVA) closed at $8.15. European antitrust authorities formally objected to Oracle's (ORCL) proposed purchase of JAVA, reports the Wall Street Journal. The move is expected to delay the deal from closing. ORCL announced in April it was paying $9.50 in cash per share for JAVA. JAVA December option implied volatility is at 47, January is at 48, April is at 34, above its 21-week average of 21, according to Track Data, suggesting larger price movement.

American International Group (AIG) closed at $35.50. Moody's sees AIG repaying government loans. AIG December call option implied volatility is at 77, puts are at 85; below its 26-week average of 108, according to Track Data, suggesting decreasing price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Today started out strong with a weaker dollar ahead of tomorrow's FOMC meeting. We have a slew of data coming out the rest of the week and tomorrow's commentary on securities purchases and liquidity programs should likely beat out the notion that rates are still staying at near-zero percent.

Here are today's unofficial closing bell levels:

Dow 9,829.27 +50.41 (0.52%)
S&P 500 1,071.63 +6.97 (0.65%)
Nasdaq 2,146.30 +8.26 (0.39%)

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Oracle Corp. (NASDAQ: ORCL) said something interesting this week: It may join the ranks of PC makers and offer a netbook PC for sale. Why on earth Oracle would want to get into the extremely popular but low-margin netbook PC hardware business is an interesting mystery, but that's exactly what Oracle chief Larry Ellison indicated.

Oracle, which is in the midst of closing its deal to buy Sun Microsystems, said that Sun's Java technology could be used to run a future Oracle-branded netbook PC. Ellison quipped that "I don't see why some of those devices shouldn't come from Sun . . . there will be computers that are fundamentally based on Java."

Sun Microsystems (NASDAQ: JAVA) will be acquired by Oracle (NASDAQ: ORCL) for $9.50. JAVA May call option implied volatility of 118 was above its 26-week average of 89, according to Track Data, suggesting larger price movement.

ORCL is recently down 80 cents to $18.20 in pre-open trading. ORCL April option implied volatility of 49 is near its 26-week average of 52, according to Track Data, suggesting non-directional movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

It seemed like a done deal. But in the high-stakes M&A game, things can easily fall to pieces.

Just look at IBM (NYSE: IBM). Over the weekend, the firm withdrew its $7 billion bid for Sun Microsystems (NASDAQ: JAVA). It's yet another heart-breaker for beleaguered Sun shareholders.

Actually, according to the Wall Street Journal [a paid publication], it looks like IBM was the only company interested in a deal. So, even though Sun had little negotiating leverage, it acted as though it had a lot – that is, by holding out for a higher valuation and firmer deal protections (such as "change of control" clauses that provided Sun execs with lush payouts). Well, I guess IBM didn't need Sun that badly or if anything, was certainly willing to play hardball.

If IBM Corp. (NYSE: IBM) really does go ahead and buy Sun Microsystems (NASDAQ: JAVA) for a cool $6.5 billion or more, the two former adversaries could be joined into a powerful computing combination. One of its -- no, its largest competitor would be: Microsoft Corp. (NASDAQ: MSFT). With many powerful players challenging Microsoft's dominance these days (Google in the consumer space), here's another one. That is, if the merger speculation turns out to be true.

Hewlett-Packard, Inc. (NYSE: HPQ) has been on a roll lately. The company has basically battered Dell, Inc. (NASDAQ: DELL) in the last two years as it increased its PC marketshare in the consumer and retail arena.

Now it has set its sights on IBM Corp. (NYSE: IBM), as it tries to become the largest computer service and consulting company in the world. It's already the largest by sales, topping $100 billion annually.

Today was a massive day, and not just for the stock market. The FOMC might as well just be turning on the printing presses for all the capital it is going to inject to banks with its $1 Trillion (plus) purchase of securities. The massive rally right after the FOMC announcement came well off of highs, but the excitement is there. The tame CPI is of no impact here in that sense.

Here are today's unofficial closing bell levels:

Dow 7,486.58 +90.88 (1.23%)
S&P 500 794.35 +16.23 (2.09%)
Nasdaq 1,491.22 +29.11 (1.99%)

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On Thursday, government statistics announced that 516,000 Americans filed for unemployment in the first week of November. Today, 16,000 more workers from two companies joined what is likely to be a daily list that strikes fear into the hearts of people across the country. And why not? After eight years of declining inflation-adjusted wages, their reward for hanging on is a heightened risk of losing those jobs altogether and competing with more people for fewer jobs in a receding economy.

The two companies announcing big layoffs: a big bank and a leading tech company that sells to banks. According to reports, Citigroup (NYSE: C) may lay off 10,000 employees -- adding to the 23,000 it has already cut in the last year. Sun Microsystems (NYSE: JAVA) announced it will can 6,000 people -- 18% of its work force --- citing the need to "align its cost model with the global economic climate."

Is this the bottom? I seriously doubt it. The unemployment rate could get up to 8.5%, and maybe as high as its post-Depression high of 10.7%, up from its current 6.5%. At least that's what Nobel Prize winning economist and New York Times op-editorialist Paul Krugman expects. Needless to say, in an economy which depends on consumers for 70% of its growth, this is not good news since it divides the country into two categories -- those who lose their jobs and those who fear losing them.

And both groups are likely to spend less.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book, You Can't Order Change: Lessons From Jim McNerney's Turnaround at Boeing, will be published by Portfolio on December 26, 2008. He owns Citi shares and has no financial interest in Sun securities.

Earlier this week, my colleague Douglas McIntyre observed that Sun Microsystems (NASDAQ: JAVA) "is one of the worst performing large-tech companies in America." It seems that ratings firm Fitch agrees with his take as last night it slashed JAVA's ratings outlook from "stable" to "negative." As a result of the move, JAVA is trading just pennies away from its annual low of $4.51 this morning.

In a release, Fitch cited a litany of challenges facing Sun Micro, including deteriorating demand outlook, recent share losses in the server market, significant decline in gross margin, and the expectation for continued pressure on information technology spending into 2009.

Even more troubling, investors learned today that Sun's co-founder, Andreas von Bechtolsheim, is stepping down from his role as chief architect to work for start-up firm Arista Networks.

However, as bleak as things may seem for Sun, another report adds an interesting angle to McIntyre's suggestion that JAVA should be sold to the highest bidder. Southeastern Asset Management, a value investment firm, said Wednesday that it's boosted its stake in Sun Microsystems to 21%. The firm said that it plans to hold discussions with Sun's management "regarding opportunities to maximize the value of the company for all shareholders." And we all know what that's code for, right? Stay tuned to see how this potential M&A deal unfolds.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research.

Minyanville contributor Adam Katz dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.

Texas Instruments (NYSE: TXN) reported disappointing results and Sun Microsystems (NASDAQ: JAVA) preannounced negatively. Last week, IBM (NYSE: IBM) followed through with their positive preannouncement and Google (NASDAQ: GOOG) outperformed expectations.

What we are seeing is a divergence in where dollars are flowing. With company web sites largely representing the most effective and quantifiable marketing tool, it should come as no surprise that GOOG has revenue streams that are reasonably insulated. (This is not a call on GOOG because I believe the market is also pricing in the fact that the hyper growth days are behind them).

With respect to IBM, infrastructure software has been the primary driver behind the top line growth and growth in margins. In the meantime, the disappointment that we are seeing from TXN and JAVA should be reasonably expected as you are seeing slowing demand for hardware (in part driven by virtualization which by definition lowers hardware requirements) and TXN which, leveraged to consumer communication devices, is also taking a pause.

Sun Microsystems (NASDAQ: JAVA) showed, once again, that it is one of the worst performing large-tech companies in America. The firm said its loss will be between 25 cents and 35 cents per share for the three months ended Sept. 28. Excluding one-time charges, the drop is between 2 cents and 12 cents per share. To make matters worse, it will probably take goodwill impairment charges for companies it has bought over the last two years. In other words, Sun paid too much.

Sun's revenue is also expected to be light, at about $3 billion.

It is old news to say that Sun has not come up with a single product compelling enough to get it out of the mud. Its servers are no better than those marketed by IBM (NYSE: IBM) or other large hardware companies. Corporate customers tend to go with the supplier that has the largest service force and best balance sheet.

The announcement does raise the question of why Sun is not being sold by its board. The stock trades at just above $5, down from a 52-week high of $24.08. So far this year, it is off nearly 70% while IBM is down only 12%.

Sun has a clean balance sheet with plenty of cash and modest debt. It would fit well with a number of larger companies that would like a larger part of the global server market.

Let the auction begin.

Douglas A. McIntyre is an editor at 247walls.com.

Sun Microsystems (NASDAQ: JAVA) shares are falling today after the company warned it will likely not turn a profit in the current quarter, despite having earnings come in at the high end of estimates this morning and announcing a stock buyback. JAVA executives said a weak financial sector has led to lower sales for the company. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on JAVA(see more pf today's earnings news).

After hitting a one-year high of $25.04 in October, the stock hit a one-year low of $8.63 in July. This morning, JAVA opened at $9.84. So far today the stock has hit a low of $9.10 and a high of $10.02. As of 12:10, JAVA is trading at $9.31, down 1.32 (-12.4%). The chart for JAVA looks bearish and improving slightly, while S&P gives the stock a bearish 2 STARS (out of 5) sell rating.

For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $11 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in eleven weeks as long as JAVA is below $11 at October expiration. Sun Micro would have to rise by more than 18.5% before we would start to lose money. Learn more about this type of trade here.

JAVA hasn't been above $11 since late June and has shown resistance around $10.15 recently. This trade could be risky if the overall market starts to rally, but even if that happens, this position could be protected by resistance JAVA might find at its 50 day moving average, which is currently around $11 and falling.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in JAVA.

Sun Microsystems' (NASDAQ: JAVA) preliminary numbers for the fourth quarter sparked an after-sessions rally on Tuesday. The tech entity said it should see somewhere between $3.7 billion and $3.8 billion for the top line. Earnings per diluted share will come in between $0.25 and $0.35 on a non-GAAP basis. Gross margin should be at least 44%.

Wall Street was apparently happy that Sun didn't expect an earnings bomb, according to this Reuters article. Understandable, considering the current state of the economy. It looks like Sun has an okay chance of meeting or beating earnings expectations. Reuters says that analysts are looking for 10 cents per share on a GAAP basis. Management is looking to do somewhere between 5 cents and 15 cents per share. It's too bad the range wasn't more narrow, but I guess the theme here is that if business is at least this good, then the shares are a buy.

As for me, I'm not sure I see the merit of the euphoria. Sure, things could have been worse, but that doesn't mean I want to buy Sun here. The stock has done horribly this year, losing 50% of its value year-to-date (at least before the rally). I think investors should be very careful about chasing values during these bearish times. It's hard to say how bad the recession will be, and how it will affect the tech names. Companies such as Hewlett-Packard (NYSE: HPQ) and Microsoft (NASDAQ: MSFT) have seen their stocks pressured by sellers. If the shares of those blue chips are having problems, I can't see why I'd want to chase Sun Microsystems.

Disclosure: I don't own any company mentioned; positions can change at any time.

Minyanville's top dog, Todd Harrison, dares to ask in public what Wall Street types quietly consider in private. For more insight and ideas, visit www.Minyanville.com.

• If the next generation Apple (AAPL) iPhone is effectively a handheld computer, is the personal computer space a place to poke on the short side?

• What's the franchise value for Sun Microsystems (SUNW, er, JAVA)?
  
  
• Maybe that's the problem. In this ADD, immediate gratification world, perhaps folks don't remember that JAVA used to be SUNW?
  
  
Woah. Nelly?


Given that funky looking Gold Fields (GFI) chart, should I stress that I'm playing name through defined risk calls?


• In addition to the note that when I unwind my short crude I'm goning to sneak out of my long metal play, too?
  
  
• While I grabbed some tertiary financial exposure this morning, why is "Good traders know how to make money while great traders know how to take a loss" repeating in my keppe as I watch the action and overhang in Lehman (LEH)?
  
  
• Speaking of ticker symbols with G's in the front and I's behind, when do I revisit Gannett (GCI), which I pared nicely above $30 and kept some for the thesis?
  
  
Speaking of pairs, how do I get long Jo, short Blair?


R.P.

Positions in LEH, GFI, GCI