Shares of computer hardware and software maker Sun Microsystems Inc. (SUNW) climbed Friday on a report that it was planning to go private, a notion that was strongly denied by the company.

Stock of Santa Clara, Calif.-based Sun rose 27 cents, or 7.8 percent, to $3.71 on the Nasdaq Stock Market (search). Volume was heavy.

Friday's strongest level of $3.98, at that time, was below the 52-week high of $5.65 set Dec. 27. There was a 52-week low of $3.29 on Aug. 12.

BusinessWeek's Inside Wall Street reported Friday that Sun Chief Executive Scott McNealy (search) is considering taking the company private with the help of Silver Lake Partners (search).

The report, which cites an unnamed hedge fund manager close to McNealy and Silver Lake, said Sun's cash position of $7.5 billion makes a leveraged buyout of $5 to $5.50 a share possible. According to the report, the thinking behind the LBO is that Sun can reduce its size by selling assets and improve its business, eventually going public again.

Sun has about 3.4 billion shares outstanding, which would make the buyout worth around $18 billion.

Jonathan Schwartz, president and chief operating officer Sun Microsystems, rejected the report.

"It's a complete joke," Schwartz said in an interview.

A spokesman at Silver Lake declined to comment.

Sun, which back in the heady days of the Internet famously claimed to put the "dot" in dot-com, has fallen on tough times in recent years. The company has continued to struggle and has ignored calls to slash costs by reducing its research and development and laying off workers. In recent months the company has made strides to regain its luster and has what some analysts say is a solid product roadmap. The company is also sitting on a horde of cash, which some analysts estimate is about $2.50 a share.

Mark Stahlman, an analyst at Caris & Co., said an LBO of Sun "appears to make considerably more sense than many other M&A related transactions mooted for the beleaguered firm."

While Stahlman said he has no specific knowledge of the potential for Sun to go private, he said the risks and rewards for both current investors and potential private investors appears to be favorable. He pointed to storage maker Seagate Technology, which was able to go private and then re-emerge as a public company, aided by Silver Lake Partners, as an example of a successful technology LBO. Stahlman noted that given pressure on many technology companies' valuations, the current conditions in the capital markets appear to favor a LBO for Sun.

Hamed Khorsand, an analyst at BWS Financial, who rates Sun a "buy," said talk of an LBO could spark other suitors, who may move to buy it outright. The analyst said he expects Sun to use its cash over the next twelve months by cutting its operating expenses and reducing its debt.