IBM is reportedly negotiating with Sun Microsystems about an acquisition. At more than $6 billion, a Sun takeover would be Big Blue’s largest-ever acquisition. Some observers are speculating that IBM would be willing to pay as much as $8 billion.
The talks were first reported in The Wall Street Journal. Neither Sun nor IBM were immediately available for comment, but analysts are bullish on the deal — and so is Wall Street. Sun’s stock skyrocketed on rumors of an IBM purchase, rising 80 percent in Wednesday trading. IBM’s stock dipped one percent.
Although analysts have speculated about the possibilities of IBM acquiring Sun for years, this is the first time the companies appear to be in serious negotiations. IBM and Sun compete in the server and software markets, but each face a larger competitor in Cisco with its newly unveiled Unified Computing System. IBM may also be feeling pressure from Hewlett-Packard’s $13.25 billion acquisition of EDS last year.
Sun’s Survival Strategy
The purchase of Sun would be a win for IBM, according to Theresa Lanowitz, a former Gartner research director and founder of Voke Research. “Sun has been in a holding pattern since the dot-com implosion,” she said. “And while Sun positioned themselves as ‘the dot in the dot com,’ that was the last innovation we have seen come from Sun.”
While it once had very competitive hardware, Lanowitz said Sun had no idea how to produce and implement effective software products. “Sun works on the assumption that all software must lead to Sun server sales — definitely a flawed idea that was proven wrong numerous times,” she said. “Sun also was never able to quite grasp the idea of high volume and low-margin sales. Sun continued on in its technology efforts like it was 1988.”
Lanowitz said IBM has clearly demonstrated that it’s more than…