IBM looks to fine tune $6bn Sun deal

IBM was aiming to put the finishing touches over the weekend to a deal to acquire Sun Microsystems for about $6bn.

The combination would bring together two of the largest makers of powerful corporate computers, with IBM expected to pay about $9.50 a share, according to people briefed on the talks.

But the price has fluctuated during the talks and was moving “minute to minute”, one of the people involved said Friday.

Both sides expect to announce a conclusion within days, probably as early as Monday.

The takeover would leave Hewlett-Packard as IBM’s main competitor in the big servers market, and would bolster IBM’s position against database group Oracle by adding the open-source MySQL program to its own high-end database software.

It would strengthen IBM’s position relative to Microsoft’s database software.

“Who can hurt IBM? HP, Microsoft and Oracle. This gives them something to use against each of them,” a former Sun executive said.

Analysts said IBM wanted Sun’s rich customer list, which could boost IBM’s lucrative services business. It is expecting cost savings to arise from cutting out Sun’s back office functions.

An antitrust challenge could force IBM to divest some of Sun’s assets. There may be complications in other lines of business, such as middleware that co-ordinates small programs on top of the operating system.

IBM has its proprietary middleware, while Sun has been pushing an open-source alternative.

The two companies have different cultures, but both have been contributors to the development of open-source tools. The Java programming language was invented at Sun.

The deal would be the largest in IBM’s history and spell the end of the line for Sun, which has seen its stock fall more than 90 per cent from its days as the favoured provider of equipment for internet groups.

Sun was founded by a team from Stanford University and was far ahead in predicting the centrality of networks. It followed its own path, designing its own chips and operating system. The result was a much-admired combination but its offerings proved too costly for many buyers as Microsoft improved its capabilities and offered systems at a much lower price.

The rapid adoption of Linux might have provided the death blow. That free and open-source operating system ran on the same machines as Sun’s, and corporations turned to it for central functions after the dotcom bust made saving money a priority.

Sun has embraced open-source but has found it a struggle to earn anywhere near the profit from servicing customers using that software that it did from selling premium hardware.

Sun and IBM both declined to comment Friday.