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Sun has sent a notice to IBM terminating its right to exclusive negotiations, and IBM in return has withdrawn its offer to buy Sun, the Journal said.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

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags IBMSun Microsystemsmergers

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

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Jack Jeffries

MSI GS75

As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr

MSI PS63

The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?