IBM's Sun deal setting: Talks reportedly near collapse

IBM's Sun deal setting: Talks reportedly near collapse

Summary: IBM's acquisition of Sun Microsystems looks like it's almost toast. According to the Wall Street Journal, talks between IBM and Sun are about to collapse.

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IBM's acquisition of Sun Microsystems looks like it's almost toast. 

According to the Wall Street Journal, talks between IBM and Sun are about to collapse. Sun's board reportedly shot down a formal offer by IBM Saturday. IBM's price: $9.40 a share or below. Sun's reaction: That's too low. 

The New York Times reports:

After the legal review, IBM shaved its offer Saturday from $9.55 a share, the offer on the table late last week, to $9.40 a share, said one person familiar with the talks. The offer was presented to Sun’s board on Saturday, and it balked. The Sun board did not reject the offer outright, but wanted certain guarantees that the IBM side considered “onerous,” according to that person.

Sun's future---and arguably the best deal it can get for the forseeable future---could be squandered over 15 cents a share. 

Now this story may be just a plant just to get some leverage, but it's fairly clear that any advantage clearly rests with Big Blue. Sun has been offered around and no one nibbled. Meanwhile, Sun isn't in much of a position to negotiate a higher price. Before word of IBM's offer, Sun shares were below the $5 mark. 

If the IBM offer falls through---and it sounds like it will---Sun shares are likely to retreat to the $5 mark again. 

While the Sun deal makes sense to IBM it's not like Big Blue needs Sun. IBM can continue on its current path. On the other hand, Sun can't.

A look at the IBM-Sun saga to date:

IBM-Sun deal nears finish line; Antitrust worries just starting

IBM's potential purchase of Sun: Here's why it makes sense

And here's why it doesn't.

The failure of McNealy's ponytail strategy

Topics: Oracle, Banking, Enterprise Software, IBM, Legal

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4 comments
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  • Why not?

    "While the Sun deal makes sense to IBM it?s not like Big Blue needs
    Sun. IBM can continue on its current path. On the other hand, Sun
    can?t."

    Why can't Sun continue it's current path?

    Sun's loss last quarter was USD209, same as it's restructuring charge.

    Sun may have peaked during the dot-com but it has a very strong
    product suite. It needs to align costs with revenues and find it's niche,
    however if it can achieve this it has a future.

    As a Sun and IBM user, IBM taking over Sun will add nothing but likely
    kill plenty.
    Richard Flude
  • The cat is out of the bag

    Acquisition negotiations mean that it is
    official that Sun is offered up for sale. Who
    will buy Sparc/Solaris now that the future
    seems uncertain.

    Potential Sun customers will hold back purchase
    decisions (especially given the current
    economic climate) and it will unfortunately
    only accelerate Suns decline. It will directly
    hurt the main revenue generator: hardware and
    storage. And remember, Sun is burning cash,
    fast!

    If this deal doesn't go through, Sun *must*
    find another buyer, sooner rather than later.

    Suns carries hefty open source investments as
    millstones around its neck: MySQL, Star/Open
    Office, Java, Glassfish, ZFS etc. Very hard to
    monetize, as Sun has now had to admit.

    All burden and very little revenue. Open source
    failed. It is very, very hard to build a
    business model around OS. Suns management just
    went with the hype, believing religiously that
    somehow, magically they would be able to sell
    *something*. How prudent does the MySQL acquisition look now?
    honeymonster
  • Thank GOD if this is true

    Now, for ****'s sake take the company private, stat!!
    enigmaforce
  • Analysis by industry analyst

    See this for Jonathan Spira?s take
    http://www.basexblog.com/2009/04/05/ibm-sun-deal-collapses-but-should-it-have-ever-gotten-this-far/
    Mark Worth