IBM is in talks to acquire Sun Microsystems for approximately $6.5 billion in cash, according to a report.
The two sides could reach a deal as early as this week, the report in Wednesday’s edition of The Wall Street Journal said. The deal's value could top $8 billion, according to the report, which would represent a 100 percent premium over Sun’s current value.
“IBM will probably be the best fit for Sun. It offers some very intriguing possibilities for IBM giving it a sizable lead in the UNIX space,” said Charles King, principal analyst with Pund-IT Research.
Sun has been in financial distress for some time and there have been a number of reports that the company has been shopping itself around. There are at least two U.S. companies with the resources to buy Sun as a single entity and the ability to absorb and market Sun’s products--Hewlett-Packard and IBM. Dell could be a wild card.
Only two days ago Cisco emerged as a fourth possibility. The San Jose-based networking giant announced its entry into the server market and its intention to unify the modern data center. (Cisco Invades Server Market)
Matters are complicated by IBM and Sun's use of different flavors of UNIX. Sun runs its hardware primarily on Solaris while IBM markets AIX as its operating system of choice.
“IBM would encourage Sun’s Solaris customers to switch to AIX and many of them already have, but Solaris, while it remains healthy, would give IBM a very interesting and competitive platform,” Mr. King said.
The server market is dominated by two operating environments--UNIX and the Intel-based X86 systems. Both IBM and Sun belong primarily to the UNIX camp.
The Intel camp has made huge strides in the last six years, and Cisco, a member of that camp, is hoping to keep that flow going.
Yet some markets--such as scientific, financial, and telecom--are firmly wedded to UNIX. So Cisco, which markets its networking products in all three, could find Sun an attractive takeover target, according to Mr. King.
“But if it’s true that IBM offered Sun a 100 percent premium over its value then it means IBM is not trying to nickel and dime Sun, so they must recognize Sun’s value. In that case I would bet on IBM,” he said.