IBM Pulls Offer To Buy Sun Microsystems

(AP)  IBM Corp. withdrew its offer to buy Sun Microsystems Inc. for about $7 billion this weekend, clouding the prospects for a deal that would shake up the computing industry, The Associated Press has learned.

Shares of Sun are sharply lower Monday on fears the deal will collapse.

Talks were in their final stages in recent days, but IBM took its offer off the table after Sun terminated IBM's status as its exclusive negotiating partner, according to two people familiar with the situation. They spoke on condition of anonymity because they were not authorized to disclose the negotiations.

One of these people said the two sides were still talking Sunday.

Armonk, New York-based IBM was believed to be offering about $9.50 per share for Sun. That was about double the price the Santa Clara, California-based server and software maker was trading for when the discussions leaked last month. Sun shares closed Friday at $8.49.

As investors reacted to the breakdown in talks, they sent Sun shares down $2.31, or 27.2 percent, to $6.18 in premarket trading Monday.

Sun was one of the darlings of the dot-com era but spent most of this decade struggling to find its place, wrestling with huge losses and thousands of layoffs. Sun was widely believed to be seeking a buyer, and analysts were not surprised to learn of the talks with IBM.

But it does not appear Sun has alternative suitors to IBM, which has server and software technologies that could mesh with Sun's.

People familiar with the talks said the companies were haggling over price and Sun's demand that IBM commit to seeing the deal through expected regulatory scrutiny. Antitrust questions would likely come because IBM and Sun would have about two-thirds of a high-end segment of the server market. The combined companies also have about half of the market for machines that store data on tape.

[cjs_cnet_xyz]

IBM has not always been a Linux company. I believe this to be true because I worked with their equipment prior to AIX. However, I commend IBM for recognizing the direction the market was taking. It used to take 9 months to ship a cardboard box. It was quite a political feat for IBM to be able to get its hardware to run Unix.

IBM and SUN are not a good match. IBM is less innovator than follower when it comes to software. WebSphere is a knockoff of a half dozen other EJB servers, WebLogic, JBOSS, etc. Java would never have risen to release under IBM. Linux would never have risen to such acceptance if SUN hadn't layed the groundwork for it.

If Apple is the innovator on the consumer (client) side, SUN has been the historic innovator on the server-side. Jobs recognized that Unix was the way with the NeXt computer that no one could afford. Apple finally migrated to Unix with OSX. These companies are moving closer together technically, don't have many direct conflicts in their business models, and compete against the same competitors (namely HPQ and IBM). A merger between these two could provide Apple with a direct road back into corporate desktop acceptance that it lost with OS6. Sun would be able to offer the most powerful client/server-based solution on the market.

[bgddy58]

>>However, there are natural synergies there particularly with Java. IBM is pervasively invested in Java technologies the most important of which is Websphere.

I agree. However, Sun's software assets are not worth approx. $9.50 a share. $1.50 would be more like it.

>>IBM has moved to Linux with its product line.

IBM has always been a Linux company. Don't believe me? Just boot a copy of Red Hat, SLES, Ubuntu, etc, and see who's copyrights appear the most.

But from a hardware perspective, IBM is still very much a UNIX (AIX) shop; not to mention that i5/OS (AS/400) and the mainframe OSs (including Liinux) are growing market share, mostly at Sun's and HP's expense.

[mikekittrell]

From the business side I don't know whether Sun's assets are worth the price. I do know that Sun

However, there are natural synergies there particularly with Java. IBM is pervasively invested in Java technologies the most important of which is Websphere. Removing the barriers between Sun and IBM would go a long ways towards giving the market a real alternative to Microsoft products.

Also, Sun is doing some phenomenal work in SSD technologies that are a natural complement to IBM's storage products.

As far as an Apple Sun partnership... I think Apple's strength is on the consumer side. Blackberry's were great business gadgets that became pervasive... IPhones on the other hand were great consumer products that are gaining business traction. The focus is fundamentally different even if they occasionally end up in the same space. Sun Apple partnership doesn't have the synergies that IBM Sun does... The result would almost have to be Sun assets "failing" vs thriving and complementing under IBM.

[cjs_cnet_xyz]

I was hoping that IBM and SUN would not merge. NetBeans would die and we'd be forced to accept the corporate mantra of Eclipse. If IBM were to acquire SUN, SUN would no longer exist. I know that it will be lost in the grand scheme of things, but remember you heard it here first. A better partner for SUN would be Apple. Apple is known as the "friendly" client/pc maker. Sun is known as the "secure" server/operating system maker. IBM has moved to Linux with its product line. Apple has moved to Unix with OSX. Perhaps SUN has had the right direction all along even if customers didn't want to pay the cost for it.

Apple competes with HP, IBM, and all the other low cost PC manufacturers. SUN competes with HP, IBM, and all the other server providers. Both Apple and SUN have managed to keep some marketshare by maintaining a degree of proprietariness. Now that Apple has pushed the envelope into the smaller iPod/iPhone market, it may be looking to rejuvenate its larger computer marketshare as well. SUN is a local, major supplier of this market. SUN's public perception is that it does maintain a degree of innovation. SUN brought the market Java. If merged, they could call the new company SunApple, or if that is to UnApple, then perhaps they could use Snapple for short.

[bgddy58]

>>After all, how would that look for IBM, which had formerly announced it was bringing out the "ax" and sending some 4,000 employees to the unemployment lines, to cut so many jobs then turn around and "buy out" Sun?

IBM employs over 350,000 people around the world. So 4,000 is barely over 1% of their workforce. IBM has had other "workforce reductions" recently, but have been mostly a good thing (as long as you're not one of the reduced). IBM, more than any company I work with, has an incredibly thick "fat" layer of employees that generate no real revenue for the company nor perform necessary jobs. When IBM sells a product, it compensates a ton of folks for the sale; many of which had absolutely nothing to do with the sale of hardware, software or services. So IMHO, IBM has been doing a pretty good job of making themselves leaner and meaner, if it is fair to call a company of their size lean and mean.

[walt1944]

IBM has announced it will not pursue its attempted buy out of Sun Microsystems after all.

After all, how would that look for IBM, which had formerly announced it was bringing out the "ax" and sending some 4,000 employees to the unemployment lines, to cut so many jobs then turn around and "buy out" Sun? It makes it look like IBM was "sacrificing" its employees so it could gobble up the competition! Who would want to work for an UNFEELING corporate entity like that??

Maybe George W. Bush would!!!!

HAIL OBAMA!!!

[bgddy58]

I am glad that IBM will not be buying Sun. Sun is essentially an idea-dead company who can't compete, and the assets of the company are worth noting near what IBM would have paid for them. The only division that IBM might gain some benefit from is the software division (Java), but again not at the reported selling price.

IBM likes to but companies in order to aquire their customer base. In this case, I think that this is a foolish idea. Sun's customer base has increasingly been, and will be more so, available for free to IT vendors with newer, fresher ideas. That will probably be IBM for UNIX servers, might be IBM for storage, and will probably not be IBM for Intel-based systems.

Which leads me to my final point - is IBM has that kind of money to kick around, why don't they work to bolster the with the most potential growth and also hapens to be the area where they have the most trouble competing? That would be the afore-mentioned Intel space. IBM needs to find a way to be more competitive with HP and Dell in this area. The problem here is not so much with IBM's products; it is that they are determined to try and sell high-volume products through organizations, progma s and methodologies that were designed for the high-value market.

[Chris_Butler]

I am pleased that IBM will not take over Sun.

I hope now that Sun can stand on its own 2 feet and prosper instead of wasting resources looking for mergers and take overs.

Mergers and take overs only suit the senior management that have not commitment to the company.

Sun is a better company than most think.

[WayAround]

"IBM Pulls Offer To Buy Sun Microsystems"

Standard stock manipulation practice for the International Mafia.

See also

1. Coke and China Huiyuan Juice Group
2. Bill Gates and Pacific Ethanol
3. Bill Gates and Six Flags
4. Coke and Fruta Modrice
5. John Deere and Zetor
etc. etc. etc.