IBM withdraws offer to buy Sun Microsystems
Acquisition talks between IBM and Sun Microsystems have broken down at the last minute, with IBM withdrawing its offer to buy Sun. The two companies seem, at first glance, ready to walk away from a potential deal that most analysts agree would be good for both parties.
IBM began talks to acquire Sun in March after the latter had spent months trying to find a suitable buyer. This came after Sun began to struggle a few years ago and has seen revenue and gross profit margins shrink recently. Analysts claim the company never fully recovered after the dot-com bubble burst at the beginning of the decade.
There have reportedly been weeks of negotiations between the two companies in order to make a deal happen. IBM had originally offered $9.55 a share, but after an extensive legal review of the deal and any issues which could arise as a result of it, IBM lowered the offer to $9.40 a share.
According to a source speaking to The New York Times, this reduced offer was presented to the Sun board on Saturday and wasn’t greeted with much enthusiasm. Although the offer wasn’t rejected outright the conditions which Sun was looking for were enough to make IBM withdraw the offer early on Sunday.
Sun’s share price was $8.49 at close of business on Friday, meaning the IBM offer was still reasonably fair. The withdrawal could be a negotiating tactic, with IBM possibly eager to see how Sun reacts if its share price continues to drop. The two companies are thought to be at a “confrontational” stage at the moment with brinkmanship taking place on both sides.
An IBM acquisition of Sun is considered to be good for both sides, but Sun is the company most in need of a deal. Some analysts describe the company as “damaged goods” and there is no guarantee another company other than IBM will step in and be prepared to take it on.
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April 6th, 2009
Now, all IBM needs to do is wait for Sun to drop to zero, swoop in and take the pieces they really wanted in the first place (core Java, DTrace and ZFS to port to Linux, maybe Directory and parts of StorageTek) and not have to deal with the toxic baggage of the rest of the company (SPARC, enterprise software, etc.).