IBM in talks to take over Sun Microsystems for $6.5bn

IBM IS in talks to buy Sun Microsystems, sources with knowledge of the matter said yesterday.

The acquisition could bolster the technology giant against rivals in the high-end computer server market. IBM is offering to pay at least $6.5 billion (€4.95 billion), The Wall Street Journal reported.

If they reach a deal, it would be IBM’s largest acquisition, and would represent a departure from its recent strategy of focusing on deals to strengthen its software and services businesses, rather than hardware.

IBM is one of Ireland’s largest employers in the technology sector, with almost 4,000 staff in the Republic.

Sun Microsystems employs 174 people at its Dublin software centre

Analysts saw the negotiations as part of a consolidation trend, as Hewlett-Packard, IBM and Cisco jostle for control of corporate data centres and compete to supply the high-end computers that power complex corporate transactions and networks.

“It makes sense in an industry consolidation view,” said Jyske Bank analyst Robert Jakobsen. “But looking at Sun’s performance over the last couple of years, it’s not one of my top picks for IBM to buy.

“Having said that, there’s clearly a huge synergy combining these two companies,” he said.

“The market hasn’t been kind to Sun Microsystems in the last 12 months. So it’s not an expensive acquisition in my view.”

Sun has long been cited as a takeover target for IBM, HP, Dell or Cisco, which introduced a comprehensive set of data centre products earlier this week.

Bankers have said that Sun has been searching for a buyer in recent months.

But the challenge of valuing the company’s intertwined software, hardware and services businesses could put off potential buyers, analysts say.

Sun has never fully recovered from the dotcom bubble burst in the early 2000s, when demand for its servers nosedived.

IBM, which had nearly $13 billion in cash at the end of 2008, declined to comment.

Its largest acquisition to date is the $5 billion purchase of Canadian software maker Cognos in 2008.

The Wall Street Journal said HP had declined to buy Sun, citing a person briefed on the matter. – (Reuters)