IBM in talks to acquire Sun Microsystems

IBM is in acquisition talks with hardware and software platform vendor Sun Microsystems, according to the Wall Street Journal.

The report has been neither confirmed nor denied by either party.

According the Wall Street Journal’s sources, IBM would pay at least $6.5 billion for Sun Microsystems. That is almost twice its present market capitalisation, but half its total revenues in the 2008 financial year – testament to the fact that investors have little faith in Sun’s ability to make money this year.

Sun has had a disastrous financial year so far. The company lost $1.7 billion in the first quarter, announcing shortly after that it plans to lay off 6,000 employees.

Among the many causes of Sun’s woes have been some expensive acquistions, notably that of storage equipment manufacturer StorageTek in 2005 for $4.1 billion and MySQL for $1 billion. The latter, in particular, formed the basis of a ‘commercial open source’ business model that has yet to prove ‘commercial’, in the traditional sense.

That means that IBM may be picking up a bargain. The IT giant has also built an open source strategy, which would be bolstered by Sun’s credibility (if not profitability) in the field. However, there may also be an overlap in the companies’ hardware portfolios.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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