IBM in talks to buy Sun Microsystems: report

SAN FRANCISCO - Technology giant IBM is in talks to buy rival Sun Microsystems for $6.5 billion, the Wall Street Journal reported Wednesday.

The deal would represent the largest purchase ever by IBM and signal the company’s determination to maintain a strong presence in the market for servers in the face of challenges from HP, Dell and Cisco.

News of the negotiations sent the long-languishing shares of Sun up by some 66 percent to $8.27 in early trading Wednesday. If the deal is finalised, it would represent a premium of 100 percent on Sun’s closing price of $4.97 Wednesday.

However the deal could face anti-trust scrutiny from the Obama administration. The combination of the two companies would create a new technology giant with 40 percent of the market for servers, and over 62 percent of the market for servers running the UNIX operating system.

A combination of IBM and Sun would also represent one of the largest technology research organisations in the world. The two companies’ combined research budget currently totals about $9 billion per year.

Sun has been struggling ever since the dot com crash of 2001, and last November, stunned by a $2-billion quarterly loss, it announced that it was cutting as many as 6,000 of its 33,000 workers over the next year.