IBM Makes $6.5 Billion Cash Offer To Buy Sun Microsystems

By: John Lester
Staff Writer
Published: Mar 18, 2009

IBM is in talks with Sun Microsystems for $6.5 billion in cash which surprised some financial analysts. The potential deal sent shares soaring as much as 64 percent.

IBM Corp could be on its way to purchasing Sun Microsystems for $6.5 billion, according to unnamed people familiar with the buyout. The news of the talks, which started on Monday, surprised financial analysts. The potential deal could be a smart move between the two technology companies.

Sun Microsystems shares soared 64 percent in early Wednesday trading. Sun shares are trading $3.20. IBM shares are down 1.9 percent, to $91.14.

While the talks legitimate, one insider said, "the talks could also fall apart without notice." In a time of a financial crisis, a current recession, it is quite unbelievable that IBM will want to spend $6.5 billion for a company which is already in trouble. Sun has been hurting from slow growth due to the downward economy.

IBM and Sun Microsystems sell servers. A merger or partnership will make better sense than a buyout.

However, IBM and Sun have two things in common. They sell servers, and that is part of the market which has kept Sun afloat while giving profits to IBM. The computer server market is still buying and appears to be strong throughout 2009.

IBM is still profiting during the bad economic times. Apple Inc is also profiting from consumer electronics with mobile devices such as the iPhone and iPod. Some financial analysts don't see a market recovery until early 2011.

Some technology companies are still profiting, even during an economic crises.

If IBM were to buy Sun, the time to do it would be now. The company does have the money, but the $6.5 billion offer suggests that even a profitable company in the hurting technology sector isn't shy to plan future strategies once an economic recovery begins. Some financial analysts believe the recovery has already started, but will be very slow on building.

Sun has struggled since the post dot-com bust in early 2001. The technology company had to cut thousands of workers last year to reduce operating costs. There was a rumor that Oracle Corp was interested in buying Sun Microsystems in 2006.