IBM in talks to buy Sun Microsystems

Big Blue eyes Web boost by putting Sun Microsystems into its fold, says report. Deal, worth about US$6.5 billion, could close as early as this week.

IBM is reportedly in negotiations to buy Sun Microsystems, in what would represent its most significant acquisition to date.

Citing sources familiar with the deal, the Wall Street Journal said Wednesday that the marriage would bolster Big Blue's footing in the Internet, software, finance and telecommunications markets.

If the deal goes through, IBM is likely to pay at least US$6.5 billion in cash to acquire Sun. It could be sealed as early as this week. According to the WSJ, that would translate into a premium of more than 100 percent over Sun's closing price Tuesday.

But although talks are under way, a transaction might not occur, the report noted.

Sources interviewed said Sun had in recent months approached a number of technology companies in hopes of being acquired. Hewlett-Packard declined the offer, a person briefed on the matter said.

IBM's bid for Sun may suggest Big Blue recognizes the need to compete in the hardware space, said the WSJ. Should the acquisition materialize, the beefed up company would seal IBM's position as the world's largest server maker.

However, IBM's profitability is expected to take a dent--Sun raked up a US$209 million loss in its fiscal second quarter, which ended Dec. 28. It also posted a US$1.68 billion net loss in its first quarter last October.

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