BOSTON — IBM Corp. withdrew its offer to buy Sun Microsystems Inc. for about $7 billion this weekend, clouding the prospects for a deal that would shake 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 after Sun terminated IBM’s status as its exclusive negotiating partner, according to two people familiar with the situation. They spoke on condition of anonymity because they were not authorized to disclose the negotiations.

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

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

IBM employs about 2,800 people at its Boulder campus and Sun employs about 2,150 people in Broomfield, where hundreds have been laid off during the past nine months.

An unknown number of workers at IBM’s Boulder site received layoff notifications on March 26 as part of the company’s reported efforts to shift work to lower-cost countries such as India. On that day, IBM laid off 5,000 of its U.S. employees.

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. Sun was widely believed to be seeking a buyer, and analysts were not surprised to learn of the talks with IBM.

But it does not appear Sun has alternative suitors to IBM, which has server and software technologies that could mesh with Sun’s.

People familiar with the talks said the companies were haggling over price and Sun’s demand that IBM commit to seeing the deal through expected regulatory scrutiny. Antitrust questions would likely come because IBM and Sun would have about two-thirds of a high-end segment of the server market. The combined companies also have about half of the market for machines that store data on tape.

Archived comments

Good! IBM would try to steal it. Bring on the competitive bidding!

meatpieandtatters

4/5/2009 5:36:41 PM

Steal it?More like save it….then lay off 10,000.

fardila@hotmail.com

4/5/2009 8:13:28 PM

Good news for people working for Sun, they will be able to keep their jobs for a little bit longer if IBM doesn’t buy them out.

kind of seems like IBM is trying to get a better deal Sun is in a bad place (bent over a barrel).

sidd

4/5/2009 8:31:15 PM

The government has learned.Antitrust violation.

FT lists offer at 6billion, not 7.Unmurdoch tainted.

creation

4/5/2009 8:47:01 PM

So– sun is now “balking” at IBM’s offer of $9.40 per share, when JAVA’s latest stock price is $8.49?This poor, defenseless, money-losing misery of a company, Sun Microsystems, needs to go the way of Detroit:Clueless, Arrogant, Mismanaged and Bankrupt.They truly deserve it for their incompetence.

I feel sorry for the employees and shareholders of Sun… they should be outraged.

IBM Withdraws $7 Billion Offer for Sun Microsystems:CNBC.com

http://www.cnbc.com/id/30059561

burmck88

4/5/2009 10:19:57 PM

burmck88

How on earth can Sun be “Bankrupt” with ~$2.5-3B in cash & short terms and very low debt? Maybe you should save commentary until after passing “Accountancy for Village Idiots 100.5”?

Freud

4/5/2009 10:40:49 PM

Sorry Freud, but I said that Sun needed to go the way of Detroit just to put it out of its misery, not that it was.Let’s see, with -39% Return on Equity, Profitability of -13.82%, Quarterly Revenue Growth of -10.90%, and a stock that was just $3.17 in December 2008, it sounds like the $9.40 per share offer from IBM, a 10% premium from it current stock price, is more than fair.But to your point, I agree that $2.2B in cash would last Sun for quite a while— long enough to be worth even less if it doesn’t sell itself now.The company has been unprofitable for a long time.

burmck88

4/6/2009 12:06:15 AM

$9.40 is now a 44% Premium for JAVA as of this morning, which is now worth $6.50 per share.Sun should have taken IBM’s deal.

Is Jerry Yang advising Sun in their deal? (Hahahaha!!!)(Jerry is the former CEO of Yahoo, who, in his infinite wisdom, declined Microsoft’s incredible offer to purchase Yahoo at $31 per share in February 2008.Yahoo subsequently tumbled to $13 because Jerry thought it was worth more.)Sound familiar?

Nice move.

burmck88

4/6/2009 12:25:49 PM

“IBM dropped its price to $9.40 and the requirements included changing the management team and the movement/removal of some senior engineering employees

I may have to believe that Sun was trying to protect their employees on this move.They do value their workers and do not ship as great a % of work overseas as IBM.Obama should remove companies from the US who put too great a % of their workforce in overseas workers.China and India are taking the jobs, Sun was tryng to prevent that.The US should support their companies who support our workforce.

And yes, the students in this country need to get themselves into graduate programs in math, engineering and science if we are to have a workforce in the future.

rutroh

4/6/2009 1:04:38 PM

Sun was trying to protect their employees?Has Sun been protecting employees by having virtually Quarterly layoffs and restructuring for the past 10 years?I mean, any news about Sun is always announcing yet another layoff.I’m all for supporting American jobs at American companies, but Capitalism tends to reward profitable companies, regardless of a particular company’s origin.Sun is not one of those companies.I think IBM walked due to Sun’s desire to shop their deal around on them, and Sun’s insistance that IBM guarantee the deal regardless of regulatory approval, which makes no sense to me.Trying to guarantee a deal prior to regulatory approval only shows bad faith on Sun’s part.Sellers who don’t really want to sell do that.

burmck88

4/6/2009 1:54:42 PM

McNealy is having a hard time letting go of his baby.He’s still in denial about the firm’s worth.Sad thing too because it was McNealy who appointed (nee anointed) PonyTail Boy.PonyTail Boy was/is a great cheerleader but by no means the kind of operational leader Sun needs.

Sun still has great products and top notch talent.What’s been lacking for years (perhaps even decades) is competent leadership.

I fear that it’s now too late.Game over.The lucky ones are those that got their notice last week.

Frobitz66

4/6/2009 9:05:28 PM