updated 03:35 pm EDT, Mon April 6, 2009
IBM pulls $7B Sun offer
IBM on Sunday pulled its $7 billion offer for Sun Microsystems, three people close to the talks indicated, the New York Times claimed on Sunday. The withdrawal came one day after Sun's board members rejected a much lower offer during negotiations, believed to be near $6 billion. IBM's intention to buy Sun was first heard of in mid-March, with a final decision that was expected by today. The $7 billion offer was much higher than the value of Sun's shares, and the deal's dissolution raises questions about the future of the computer workstation and server manufacturer.
IBM's team of more than 100 lawyers was reportedly performing due diligence and researching the issues associated with the purchase. Its findings likely influenced the offer dropping to $9.40 per share instead of the original deal of $9.55, at which Sun board members balked. While they did not reject the offer, they requested certain guarantees to go along with it, though these were deemed "onerous" by IBM, an anonymous source familiar with the talks said. Sun then said it would no longer engage in talks with IBM exclusively, another source said, and IBM withdrew its offer on the next day.
The lowered offer also included "change of control" contracts for Sun executives, senior engineers and managers, which were higher and more numerous than IBM had originally estimated. Sun, on the other hand, was concerned about provisions that would restrict IBM's ability to break itself off from the deal.
Talks between IBM and Sun could still resume if Sun's shares drop further from Friday's close of $8.49 and major investors put pressure on the company to reach a deal. The door is now open for Sun to seek other buyers, including IBM rivals HP and Cisco, with the latter recently entering the market for server computers.