IBM withdraws $7-billion offer to acquire Sun

BOSTON (AP) — IBM Corp. withdrew its offer to buy Sun Microsystems Inc. for about $7 billion over the weekend, clouding the prospects for a deal that would have shaken up the computing industry, The Associated Press has learned.

Talks were in their final stages in recent days, but IBM took its offer off the table this weekend after Sun terminated IBM’s status as its exclusive negotiating partner, according to two people familiar with the situation, who spoke on condition of anonymity because they were not authorized to disclose the negotiations.

One of these people said the two sides were still meeting Sunday.

The breakdown in the negotiations was first reported by The Wall Street Journal.

Armonk, New York-based IBM was believed to be offering about $9.50 per share for Sun. That was about double the price the Santa Clara, California-based server and software maker was trading for when the discussions leaked last month. Sun shares closed Friday at $8.49.

Sun was one of the darlings of the dot-com era but spent most of this decade struggling to find its place, wrestling with huge losses and thousands of layoffs. As a result many analysts were not surprised Sun and IBM were in talks.

Sun still owns key server and business-software technologies that might have fit in IBM’s product and services lineup. But a deal likely would face antitrust questions, and Sun has been pushing IBM to make certain commitments to seeing the deal through such scrutiny.

Shares of Sun Microsystems Inc. dropped in Europe yesterday after IBM’s talks to acquire its smaller rival broke down.

Sun Microsystems’ Frankfurt-listed shares were down 23.9 percent at 4.74 euros by 0816 GMT, while IBM’s stock there was down 0.4 percent at 75.50 euros.

The buyout was seen as a means of survival for the Silicon Valley company, which has been losing market share. A deal would also have helped IBM compete more effectively against rivals such as Hewlett-Packard Co.

An IBM spokesman had declined to comment, while Sun officials did not return calls.

Sources told Reuters in March that IBM was in exclusive talks to buy Sun and had proceeded to the due diligence stage. One source had said on Saturday that IBM lowered its offer price for Sun to $9.50 a share from $9.55 a share and that a deal may be announced this week.

Sun shares had risen to $8.49 on Friday, from $4.97 on March 17, a day before talks between the two technology companies were first reported. The Wall Street Journal had previously said IBM’s original bid was $10 to $11 a share.