Sun Microsystems Inc shares surged nearly 80 percent on Wall Street on Wednesday after reports IBM was in talks to buy the computer server company.
The Wall Street Journal reported overnight that IBM was seeking to purchase Sun in a cash deal for more than US$6.5 billion, or US$10 to US$11 a share, a premium of more than 100 percent over Sun’s closing price on Tuesday.
Sun shares soared by 78.87 percent in New York on Wednesday to close at US$8.89. IBM lost 1.03 percent to US$91.95.
The Journal, citing people familiar with the matter, said Sun in recent months had approached a number of large technology companies in the hopes of being acquired.
Hewlett-Packard, declined the offer, the newspaper said, and a spokesman for Dell, the world’s third-largest computer server maker, declined to comment.
The Journal said the Sun acquisition would bolster IBM’s position on the Internet, in software and in finance and telecommunications markets.
The newspaper also noted that both IBM and Sun make computer systems for corporate customers that are not reliant on Microsoft’s Windows software.
Several analysts, however, questioned the benefits for IBM of the purchase of Sun, which owns the rights to the Java programming language and MySQL open source database software, but has been running up big losses recently.
Devina Mehra, chief strategist at First Global, said the deal “appears reasonably priced” but “we do not think it is a very good idea for IBM to acquire Sun.
“Sun has been in trouble far too long, with a declining business model, for IBM to get entangled into, specially in these troubled times,” he said.
Goldman Sachs said it had questions about the “short-term and longer-term benefit to IBM from a potential combination.
“While there would undoubtedly be significant cost savings in the hardware divisions of both companies post a potential acquisition, there is also substantial overlap in almost all product lines,” it said.
“It is hard to see what strategic value [Sun] has to IBM, but the larger company is flush with cash, and may not be able to help itself,” analyst Douglas McIntyre wrote at the Web site 247wallst.com.
A purchase of Sun would be the largest in the history of IBM and in line with “Big Blue” chairman Samuel Palmisano’s recent pledge not to sit back but to engage in “strategic acquisitions.”
A deal could potentially run into difficulties with the anti-trust division of the US Department of Justice because of the wide range of products the firms now make.
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