IBM in Talks to Buy Sun in Bid to Add to Web Heft
International Business Machines Corp. is in talks to buy Sun Microsystems Inc., people familiar with the matter said, a combination that would bolster IBM's heft on the Internet, in software and in finance and telecommunications markets.
The two companies have a common interest in that both make computer systems for corporate customers that aren't reliant on Microsoft Corp.'s Windows software, and their product lines are less dependant than rivals' on Intel Corp.'s microprocessor technologies. The two companies are also strong supporters of open-source Linux and Java software.
People familiar with the matter cautioned that, while talks are under way, a transaction might not occur and that the talks could fall apart. Ian Colley, a spokesman for IBM, declined comment on questions about any talks with Sun. A spokesman for Sun didn't return calls requesting comment.
If the deal does go through, which could happen as early as this week, IBM is likely to pay at least $6.5 billion in cash to acquire Sun, the people said. Including $1.4 billion in cash on Sun's balance sheet, the total deal value would be about $8 billion, or about $10 to $11 a share. That would translate into a premium of more than 100% over Sun's closing price Tuesday.
A combination would require melding companies with distinct, dissimilar cultures. IBM, an East Coast stalwart that helped invent the computer industry, grew up with a button-down style and a philosophy of delivering what customers want. Sun, which grew up in the go-go environment of the 1980s in Silicon Valley, is an engineering-driven maverick with a record of major innovations that has lately struggled to profit from them.
Once the quintessential highflying startup under Scott McNealy, one of the tech sector's most outspoken chief executives, the company started in computer workstations and morphed into a major seller of server systems during the Internet boom.
But the company has struggled since the dot-com bust, jumping late on the trend of low-cost servers that use chips from Intel and Advanced Micro Devices Inc. Mr. McNealy's pony-tailed successor, Jonathan Schwartz, has driven the company to focus more on innovations in software and data storage. But Sun shares have plummeted over the past year, battered by its reliance on sales of high-end machines and customers in the financial sector, which experienced the economic slump earlier than other parts of the economy.
In recent months, Sun has approached a number of large tech companies in the hopes of being acquired, said people familiar with the matter. The world's largest tech company, Hewlett-Packard Co., declined the offer, said a person briefed on the matter. A spokesman for Dell Inc., the world's third-largest server maker, declined to comment.
Source: wsj
