IBM Could Buy Sun Microsystems For $6.5 billion

Rumours of the impending acquisition of Sun Microsystems by IBM have sent the price of the company stocks soaring reaching $8.40 in pre-market trading, a far cry of the $4.97 at close yesterday.

Many expect Sun Microsystems' shares to go well beyond the $9 mark which would value the company at $6.7 billion, the estimated cash price that IBM is expected to fork out for the business.

The Wall Street Journal quoted persons close to the transaction and said that the deal could occur before the end of the week although there is a chance that talks could "fall apart".

IBM Shares have fallen heavily, currently trading a whisker above the $90 mark over investors fears that the company might be overstretching itself during those lean years.

But IBM is financially secure and had nearly $13 billion of cash on hand at the end of 2008 and even at $6.5 billion, Sun Microsystems is a very, very attractive proposition.

There would be significant synergies between the two companies and would make the combined entity the most open source friendly company in the business with huge projects such as Open Office and Eclipse.

Sun Microsystems has been struggling as Cisco Systems and HP became more aggressive in Sun's traditional financial and telecommunications market.

The company recently reorganised in three business entities and laid off 6,000 employees after accruing losses of around $500 million.

Both companies have denied to comment on the rumours but the recent announcement of Cisco's new range of big iron hardware might have quicken Sun's decision.

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Our Comments

The top nine tech companies in the world share a cash pot of nearly $135 billion with Cisco, Microsoft and Apple owning more than half of it. With some technology shares out there at their lowest point for years, there is some great bargains that could be snapped. Sun Microsystems and Palm are two favourites, with Motorola not far behind.

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IBM in talks to buy Sun Microsystems : WSJ