Google may not be buying Twitter, but IBM may be closing in on its rumored Sun Microsystems acquisition for about $7 billion. The companies have reportedly been in negotiations for several weeks on a deal that would propel IBM into the lead in the Unix market.
The New York Times cited people familiar with the matter as saying IBM is willing to pay $9.50 a share. That’s down from $10 reported earlier and a near-100 percent premium on Sun’s value before the acquisition rumors began in March.
If IBM acquires Sun, it will inherit a large software portfolio from a former rival that includes the Solaris operating system, the open-source MySQL database, the Java programming language, and SPARC chips. Sun is also a market leader in server sales.
The Sun Fire Sale
The IBM-Sun deal would be an unusual merger, according to Dana Gardner, principal analyst at Interarbor Solutions. In fact, he added, merger may not be the right word. He called it a “fire sale acquisition” of a company whose time ran out in the midst of an economic downturn.
“IBM is really looking at the equivalent of a rummage sale. IBM will pick over the parts, keep the ones that make some sense, and discard the others,” Gardner said. “From IBM’s perspective, the combination of removing competition and gathering market share and products probably adds up to the aggregate $4.3 billion that they will be paying.”
Although the acquisition cost that’s being reported is about $7 billion, if you subtract Sun’s $2.7 billion in assets, Big Blue would only pay about $4 billion. Given the amount of cash IBM has on hand, along with its $100 billion in annual revenues, the company isn’t looking at any debt obligations.
Managing Antitrust Concerns
“If this acquisition happens, it’s a rather sad outcome for Sun. Over its illustrious…