IBM is in talks to buy Sun Microsystems Inc for at least $6.5 billion, The Wall Street Journal reported, in a deal that could bolster their computer server products against rivals such as Hewlett-Packard Co.
hat would translate into a premium of about 100 percent over Sun's Nasdaq closing price Tuesday of $4.97 a share, the paper said, citing people familiar with the matter.
Sun, which was not immediately available for comment, has long been cited as a takeover target for International Business Machines Corp, HP, Dell Inc or Cisco Systems Inc, which this week unveiled its plan to start making blade servers that power corporate computer networks.
But bankers and analysts have also said the challenge of valuing Sun's intertwined software, hardware and services businesses could put off potential buyers. The company has never fully recovered from the dot-com bubble burst in the early 2000s, when demand for its high-end servers cratered.
"It makes sense in an industry consolidation view, but looking at Sun's performance over the last couple of years, it's not one of my top picks for IBM to buy," said Jyske Bank analyst Robert Jakobsen, speaking from Denmark.
"Having said that, there's clearly a huge synergy combining these two companies," he said.
"It will lessen the competitive pressure within the data center," he said, adding, "The market hasn't been kind to Sun Microsystems in the last 12 months. So it's not an expensive acquisition in my view."
An IBM spokesman in Bangalore declined to comment. The U.S. representatives of the company, which had nearly $13 billion in cash at the end of 2008, were not immediately available.
The Frankfurt shares of Sun rose 54 percent after The Wall Street Journal's online report, which said the company had approached a number of large tech companies in the hopes of being acquired. HP declined the offer, the paper said, citing a person briefed on the matter.
The paper said a deal with IBM could happen as early as this week, but that talks could also fall apart. If IBM buys Sun, it would be the company's largest acquisition since it bought Canadian software maker Cognos for about $5 billion in January 2008.