IBM bidding to take over Sun Microsystems: report

18 March 2009

International Business Machines Corp is in talks with Sun Microsystems Inc to take over the ailing computer major, according to a widely publicised report in the Wall Street Journal. Although neither IBM nor Sun was willing to comment, the report said the deal would be worth at least $6.5 billion.

The Frankfurt-listed shares of Sun Microsystems surged by as much as 61 per cent in the wake of the report. The offer would value Sun's stock at more than double the closing price of $4.97 in the US yesterday, WSJ reported, but added that an agreement may not be reached, the newspaper said. Officials at Sun and IBM declined to comment.

Buying Sun would help IBM widen its lead over Hewlett- Packard Co in the $53.1 billion market for computer servers. Sun is projected to post its third consecutive quarterly loss as chief executive officer Jonathan Schwartz seeks to weather the global recession by slashing as many as 6,000 jobs and offering lower-priced products.

Paying over $6.5 billion for Sun would make it IBM's biggest acquisition ever. The company bought Cognos Inc for $4.9 billion last year to compete with Oracle Corp and SAP AG in providing software that tracks corporate performance.

Companies in the technology industry have announced $3.6 billion of acquisitions so far this year, less than a fifth of the value of takeovers they announced in the same period a year earlier, according to data compiled by Bloomberg. The acquisition would be the biggest in the industry since Hewlett-Packard agreed to buy Electronic Data Systems Corp for $13 billion in May last year.

In August last year, San Jose Mercury News had  reported that given Sun's depressing forecast and declining share price, Sun Microsystems was ripe for a takeover by technology majors like IBM, HP, Dell or Fujitsu. (See: Sun Microsystems a takeover target: report).