On the surface, it seemed something big was going down at

Sun Microsystems

(SUNW) - Get Report

last week.

Sun CEO Scott McNealy spent five days on the road with

Morgan Stanley

PC and hardware analyst Thomas Kraemer, schmoozing with the white-shoe firm's best clients.

While there's nothing surprising about an investment house such as Morgan Stanley chaperoning one of its banking clients to, say, a morning technology conference, it's odd for even the most Street-savvy CEO to spend an entire week on a road show without any news to spread.

"In my six years on the buy side, I have never seen anything like it," confides one analyst at a money-management firm who requested anonymity. "A whole week with a firm, even if it is Morgan Stanley, is quite unusual." Adds Jeff Matthews, a money manager with

RamPartners

: "What did they call it? A Tour de Sun? Come on."

There's one more unusual twist: Morgan Stanley doesn't even have a banking relationship with Sun, according to the Wall Street firm. Of course, Morgan Stanley was the lead banker in helping

America Online

(AOL)

arrange a deal with

Netscape

(NSCP)

last October. The triangular deal, which included Sun taking a chunk of Netscape, is expected to be wrapped up this month. Morgan Stanley also led the Netscape IPO in 1995 and a year later did the same for an AOL secondary offering. Is a secondary offering for Sun in the cards?

That's not likely right now, even though Morgan Stanley and Sun went on a five-day tour with stops in New York, Boston, Chicago, Minneapolis and San Francisco. But it could be a future possibility, says one risk-arbitrage manager. "They might be thinking of doing a secondary and promoting the company" by visiting shareholders and talking up the stock, says David Liptak, principal with risk-arbitrage hedge fund

West Broadway Partners

.

Another road-show theory is that Sun is building up institutional-investor momentum for an acquisition. But, Liptak says, in that case, the company's weeklong tour would have been much more secretive. "If Sun were doing an acquisition, they would be sneaking around on corporate jets with Morgan Stanley's M&A guys. They would be much more discreet about it. There's a firewall between the analysts and investment banking anyway."

A future acquisition shouldn't be ruled out, however, because Sun's pricey stock ideal for use in a stock swap. And this tour would have been the ideal place to begin building interest in one. "I would think that with its inflated stock valuation,

Sun could easily acquire an Internet company or technology that would help it," says the analyst at the money-management firm.

Kraemer, who has a strong buy on Sun, didn't return calls seeking comment, and neither did a Sun spokesperson. The road show was a way for McNealy to meet with literally hundreds of Morgan Stanley institutional clients in an informal setting, according to an assistant in Kraemer's office.

Palo Alto, Calif.-based Sun has already established itself -- both in Wall Street and Silicon Valley -- as major Internet player. An acquisition would also assure institutional investors that Sun has the fuel to keep its rocketing stock price headed higher. Institutional investors own 68% of Sun's outstanding shares, according to

Market Guide

. "Sun, along with

IBM

(IBM) - Get Report

, has been an institutional play all along," says Craig Johnson, principal of the consulting firm

Pita Group

. "And McNealy wants his company to continue to be valued as an Internet play."

The Morgan Stanley jaunt may have been launched for the simplest of reasons: to maintain Sun's stock price. Since last October, when it launched its ".com" advertising strategy, its stock has rocketed 153%, hitting a high of 115 on Jan. 20. But by the start of the road show last week, it had fallen to as low as 94. Not to worry. After the weeklong pep rally, Sun's stock had leapt back up to triple digits, ending Friday at 104 5/8, up a tidy 11% for the week. The stock was up fractionally at 109 1/2 Tuesday.

Analysts estimate Sun will earn $2.80 a share for its current fiscal year ending in June. At its current price of 112, Sun stock is trading at 40 times this year's estimated earnings, nearly double its five-year growth rate of 19%. To keep prices at these levels, McNealy has to stress the company's strategy to select investors, especially to the institutions that have propelled the company's stock into the stratosphere.

Controlling more than 8 million shares, McNealy has a reason to keep prices at these levels. And some Sun executives are taking advantage of the lofty valuations.

A number of insiders were busy selling stock in the last week of January and during the month of February. Sun CFO Michael Lehman, for one, sold 86,000 shares worth $9 million last month, unloading almost half of his holdings, according to Sun's proxy statement from Feb. 11.

Staff reporter

Erin Arvedlund contributed to this story.