IBM in Talks to Buy Sun: Report

Move would strengthen IBM's hand against rivals HP and Cisco

By Jackson West
|  Wednesday, Mar 18, 2009  |  Updated 5:54 PM PDT
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What Would it Mean if IBM Bought Sun Micro?

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A successful sale at a premium price would do much to redeem Sun CEO Jonathan Schwartz's tenure at the company.

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What Would it Mean if IBM Bought Sun Micro?

Stocks for both companies went up Wednesday after IBM announced it may buy Sun Microsystems.
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IBM is in talks to purchase Santa Clara-based Sun Microsystems for between $6.5 billion to $8 billion according to anonymous sources cited by the Wall Street Journal.

The Associated Press confirmed the report.

Sun, which has seen its business in computer server and networking hardware dwindle while focusing on open-source software, has been struggling for years.

Sun CEO Jonathan Schwartz, one of the most highly paid chief executives in Silicon Valley, has presided over an eighty percent decline in Sun's market value since taking the helm in 2006.

The news skyrocketed Sun shares in early trading.  They were 66 percent, to $7.26. IBM shares were down a little more than two percent, to $90.78.

The move would help IBM compete with companies like Hewlett-Packard, a Sun rival in the server hardware business.

Cisco announced on Monday it will start selling its own server-type computer that will directly compete with both HP and IBM.

IBM has also been a big player in developing open-source software for business and networking applications, and would stand to benefit from Sun's efforts on that front as well.

The $6.5 billion price tag represents a significant premium on the value of Sun's shares, and the total cost could amount to $8 billion.

It would be one of the largest acquisitions for IBM in recent memory.

According to the unnamed sources familiar with the discussions, a deal could be signed as early as this week. Lori Preuitt contributed to this report.

Jackson West hopes this means Schwartz will get a haircut and lose the ponytail.

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