According to a source familiar with the matter, the two companies failed to agree on price and therefore the talks collapsed.
The $7 billion deal valued Sun Microsystems at about $9.40 a share. The Santa Clara, California based Sun rejected the offer, terming it as too low even though the offered price was about double the price the server- and software-maker was trading at last month.
Sun also alleged that the offer gave IBM too much "optionality" or flexibility to back out from the deal.
Toni Sacconaghi, an analyst with Sanford C. Bernstein, had noted that the board of Sun Microsystems would have “a lot of explaining to do if they turned down an offer of $9.40 a share”. He was generally referring to the deterioration in the outlook for tech spending and specifically to the 79 percent fall in the company’s shares in 2008.
IBM is a multinational computer technology and IT consulting corporation. It has been on an acquisition spree since 2002. In the last six years, IBM has spent $9.3 billion on close to 35 software companies. These acquisitions have helped IBM perk up its software sales by 37 percent.
On the other had, Sun Microsystems, once the cynosure of all eyes during the dot-com era, has struggled for most of the time in the last decade. In spite of grappling with huge losses and layoffs, Sun can still be the proud owner of key server and business-software technologies.
Yoshiharu Izumi, a Tokyo-based analyst at JPMorgan Chase & Co, opined, “Although this deal wasn’t a life or death situation for IBM, Sun’s assets are attractive enough to draw other suitors.”
Hewlett-Packard (NYSE: HPQ); Cisco Systems Inc (NASDAQ: CSCO) and Intel Corp (NASDAQ: INTC) are among the probable suitors that may jump in and bid for Sun Microsystems now.
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