The owner of the largest number of shares of Sun Microsystems Inc. may run into a loss as high as $500 million, if the International Business Machines Corp. takes over the company as per the terms noted earlier last week.

Southeastern Asset Management, an investment advisory firm had earlier paid $2.13 billion, or an average of $13.25 per share, for a 22 percent stake in Sun, revealed the January regulatory filing. An arrangement at $9.40 a share would come to a payout of about $1.5 billion for Southeastern.

This brings into the light the quandary faced by some of Sun investors, on whether to agree for a take over and bear some losses, or wait for Sun Chief Executive Officer Jonathan Schwartz to change the business fortunes.

Besides, Southeastern’s Longleaf Partners Fund also gave $10.1 million for call options, giving it the right to buy 5 million Sun shares at $10 each. These options are slated to expire in January 2010.

Investments from Southeastern first started in Q3 2007, when the stock traded at an average price of $20.99 a share.

Sun’s shares had fallen about 80 percent in the two years. IBM, the manufacturer of high-end computers and software offered $9.10 to $9.40 a share for Sun, according to people close to the matter. With the fall apart of IBM’s multi-billion bid, shares at Sun have suffered a further jolt, pushing its shares even further down.