Proposed Acquisition Of Sun Microsystems By IBM Abandoned For Now

IBM’s proposal to acquire the rival software maker Sun Microsystems for $7 billion has nearly collapsed after the two companies failed to reach any agreement on price, according to the reports.

The acquisition talks were believed to be in final stage of late and the reports about the collapse of the negotiations may not be final.

It has been reported that Sun wasn’t exactly pleased with the IBM’s offer of $9.40 per share, the company made last month, and it wasn’t clear if the buyout talks between the two companies would ever resume.

The deal would have surely helped IBM to compete better against the rival companies such as Hewlett Packard, as acquiring Sun would have been the biggest acquisition for IBM to date.

Sun, once an attractive firm for the investors during technology boom, has been hit hard by the ongoing crunch in global economy and is expected to post revenue losses for the third consecutive quarter, and is said to layoff around 6,000 employees in the upcoming months.

An IBM official declined to comment on these reports, while Sun execs didn’t respond to the calls. However, Sun Microsystems’ shares plunged considerably by 28 percent in the European trading market after the report of the collapsed acquisition hit the floor.

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Our Comments

$7 billion for Sun Microsystems is cheap and almost certainly a bargain for what is on offer. Unsurprisingly, Sun's share prices went down significantly, losing as much as 25 percent in pre-market trading, to only $6.35. It is important though that Sun Microsystems doesn't do a "Yahoo" or they will lose out in the short term. But Sun's strategy could possibly be looking to buy more time for another company, Cisco maybe, to swoop in with a better price.

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