IBM, Sun merger talks could take more days

By : |March 23, 2009 0

NEW YORK, USA: IBM is still in talks to buy Sun Microsystems Inc and discussions could take several more days as IBM studies various parts of Sun’s computer server and software businesses, according to people with knowledge of the matter.

The sources, who were not authorized to speak publicly on the issue, called IBM’s examination of Sun’s assets standard procedure. hey added that it will take some more days before reaching any deal.

IBM and Sun declined to comment.

                                 

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If they reach agreement, Sun would be IBM’s largest acquisition and bolster its offering of computer hardware, software and services.

A combination of the world’s No. 1 and No. 4 makers of server computers, however, could draw antitrust scrutiny from regulators in the United States and abroad, analysts said last week.

The merged company would hold 65 per cent of the $17 billion market for Unix servers, which major companies and governments rely on for critical operations, according to market researcher IDC.

IBM and Sun were the top two players in that market in 2008, with 37 per cent and 28 per cent respectively. Hewlett-Packard Co was third, with 27 per cent.

Not Yet Final

CNBC, citing a ‘Wall Street Journal’ report, said earlier on Friday that International Business Machines Corp’s due diligence process was holding up the Sun deal.

IBM is examining the terms of Sun’s various technology licenses to check for any conflict with IBM’s business, the Journal reported on its website. It said a deal could be worth $6.5 billion to $8 billion.

Some analysts also have questioned whether it was worth IBM paying what would amount to a 100 per cent premium for Sun, whose shares had plunged 70 per cent in the past year before the talks with IBM were first reported on Wednesday.

Analysts and bankers told Reuters in November that Sun, which rose to prominence in the 1990s, could be forced to sell itself as it struggles to regain profitability and bring its operating expenses under control.

The company never fully recovered from the dotcom bubble burst in the earlier this decade, when demand for its high-end servers plummeted.

Its ambitions to move into software through acquisitions like database maker MySQL have been slow to produce results and it has failed to fully commercialize the Java software it invented in the early days of the Web.

Some analysts have said that IBM, with greater manpower and more effective management, may be able to make better use of Sun’s assets.

Many also have said that they see a potential deal between the two companies as part of a consolidation trend, as IBM and rivals like HP and Cisco Systems Inc compete to offer software, services and hardware based on emerging technologies that can power complex corporate transactions and networks.

Sun shares closed Friday’s session down 6.14 per cent at $8.10 on the Nasdaq, giving the company a market value of about $6 billion based on about 745 million shares outstanding as of January 30.

IBM shares closed down 0.16 per cent at $92.51 on the New York Stock Exchange.

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