Home / World Business
Sat, Apr 04, 2009 - Page 10 News List

IBM reportedly to purchase rival Sun

BRIGHT PROSPECTS: Although in a slump for nearly a decade, Sun is one of the largest sellers of server computers and is known for systems based on its Sparc chips

NY TIMES NEWS SERVICE , NEW YORK

IBM appears on the verge of acquiring Sun Microsystems, a longtime rival in the computer server and software markets, for nearly US$7 billion.

The two companies have been negotiating for weeks, ironing out terms of an agreement that would turn IBM into the dominant supplier of high-profit Unix servers and related technology.

IBM is offering US$9.50 a share, down from a bid of US$10 a share, said people familiar with the discussions who were not authorized to speak publicly. The new agreement would restrict IBM’s ability to walk away from the deal, these people said.

Even at US$9.50 a share, the deal would value Sun at close to US$7 billion. It is close to a 100 percent premium based on Sun’s value before rumors of an acquisition spread last month.

Representatives of IBM and Sun declined to comment. People familiar with the negotiations say a final agreement could be announced yesterday, although it is more likely to be made public next week. IBM’s board has already approved the deal, they said.

Shares of IBM rose more than 3 percent on Thursday, to US$100.82, and Sun’s shares rose more than 2 percent, to US$8.21.

IBM has spent weeks poring over Sun’s patents and licensing agreements. Some 100 lawyers have been working in a hotel in Silicon Valley on intellectual property matters.

Although in a slump for nearly a decade, Sun is one of the largest sellers of server computers and is known for systems based on its Sparc chips. It has a vast software portfolio, including the Solaris operating system, the open-source MySQL database and the Java programming language.

“Sun has obviously been a lost child for many years, but they have some great assets,” said Rebecca Runkle, director of technology research at Research Edge, an equities analysis business. She said that Sun and IBM’s cultures would mesh in their commitment to large research and development projects.

Sun’s software assets would fit into IBM’s long-term strategy of chasing higher-profit software and services sales. It could also give IBM more strength in competing against Oracle, which has sold its database software on top of Sun systems for years.

IBM’s acquisition of Sun would disrupt that long partnership with Oracle. IBM could also undercut Oracle by more actively promoting the free MySQL software, which has become the most popular database software with Internet companies.

Hardware inherited from Sun could present antitrust concerns. IBM faces an anti-trust complaint from T3 Technologies over its dominance in the mainframe market. By buying Sun, IBM would gain close to total control over robotic tape storage devices used to file data on mainframes.

Sun has a sales and technology partnership with Fujitsu for the sale of Unix servers. If IBM buys Sun, Fujitsu and Hewlett-Packard will be the combined company’s only major competitors in the Unix market, a possible concern for regulators in the US and Europe.

This story has been viewed 1475 times.
TOP top