IBM, Sun unable to reach a deal, reports say

The companies apparently cannot agree on a price and other terms

Merger talks between IBM and Sun Microsystems were said to have broken down on Sunday, with the two companies unable to agree on the terms of a deal.

Sun's board rejected a formal offer from IBM on Saturday, considering the offer price too low, The Wall Street Journal reported. Sun was also concerned that the offer gave IBM too much leeway to walk away from the deal, according to the newspaper, which cited unnamed sources familiar with the situation.

The two companies are reported to have been in merger talks since at least March 18. The acquisition, valued at about US$7 billion, would extend IBM's lead at the top of the server market and give it control of Sun's Solaris, Java and other technologies.

But the companies had reportedly been haggling over a price, and on Saturday Sun rejected IBM's offer of $9.40 per share, according to The New York Times, which also said the talks had fallen apart.

Sun had been seeking assurances that IBM would not walk away from the deal even if it faced tough regulatory hurdles, the Times said, and IBM considered the requirement too onerous.

Sun has sent a notice to IBM terminating its right to exclusive negotiations, and IBM in return has withdrawn its offer to buy Sun, the Journal said.

Such brinkmanship isn't uncommon during late-stage negotiations, the paper noted, and the companies may yet resume talks. But for now, the stance between them was described as "confrontational."

IBM and Sun were first reported to be in merger talks two-and-a-half weeks ago. Neither company has confirmed or denied that any discussions are under way.

IBM has conducted its due diligence of Sun and found nothing that would prevent it from buying the company, the Journal said.

If the companies fail to make a deal, it is unclear whether another large vendor will step in and bid for Sun. After IBM first expressed its interest in an acquisition, Sun's investment bankers shopped the company around to most large IT vendors over the winter to see if any others were interested, the Journal said, but none were.

That puts Sun in a tough position, said Dan Olds, principal analyst at Gabriel Consulting Group. With no other suitor likely to step forward, Sun will probably have to accept an offer from IBM eventually, even if it means swallowing less favorable terms, he said.

The uncertainty around Sun's future will make companies wary of making big investments in Sun's products, he said, adding to the pressure to make a deal.

"Enterprise customers prize vendor stability; they do not buy big ticket items from vendors who are in turmoil," Olds said.

Join the Good Gear Guide newsletter!

Error: Please check your email address.

Tags IBMSun Microsystemsmergers

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

James Niccolai

IDG News Service
Show Comments

Essentials

Lexar® JumpDrive® S57 USB 3.0 flash drive

Learn more >

Microsoft L5V-00027 Sculpt Ergonomic Keyboard Desktop

Learn more >

Mobile

Lexar® JumpDrive® S45 USB 3.0 flash drive 

Learn more >

Exec

Audio-Technica ATH-ANC70 Noise Cancelling Headphones

Learn more >

HD Pan/Tilt Wi-Fi Camera with Night Vision NC450

Learn more >

Lexar® Professional 1800x microSDHC™/microSDXC™ UHS-II cards 

Learn more >

Lexar® JumpDrive® C20c USB Type-C flash drive 

Learn more >

Budget

Back To Business Guide

Click for more ›

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Michael Hargreaves

Windows 10 for Business / Dell XPS

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?