Sun Microsystems Inc shares slumped as much as 28 percent in European trading after talks about a proposed IBM Corp takeover for US$7 billion collapsed, a person familiar with the matter said.
Sun’s board, headed by co-founder Scott McNealy, informed IBM on Saturday it was breaking off exclusive negotiations, the person said. Sun, the developer of the Java programming language, rejected an offer of about US$9.40 a share as too low, said the person, who declined to be identified because the talks are private.
The breakdown of what would have been the biggest technology deal of the year increases pressure on McNealy to find another suitor as the server maker heads for its biggest annual loss in six years because customers are cutting orders. The offer was 11 percent higher than Sun’s stock price on Friday, even after expectations of an agreement drove up the shares 71 percent in the past two-and-half weeks.
Sun should “articulate a go-it-alone strategy,” said Peter Falvey, co-founder of Boston-based investment bank Revolution Partners. “What they need to do is figure out: Do they aggressively go after other potential acquirers?”
Sun slumped as much as US$2.41 to the equivalent of US$6.08 in German trading, from the closing price of US$8.49 in the US on Friday. The stock traded at US$6.42 as of 9:22am in Frankfurt. IBM was little changed at US$102.21 in Germany from the close of US$102.22 on the New York Stock Exchange last week.
Both companies declined to comment.
Sun balked because there were no guarantees in the merger contract that IBM would close the deal if the companies faced barriers or delays such as an antitrust review, the person said. Buying Sun would have been IBM’s biggest purchase ever.
It’s unclear whether the talks have come to a dead end or whether negotiations will resume, the person said. IBM, led by chief executive officer Samuel Palmisano, planned to announce the acquisition of Santa Clara, California-based Sun today, another person familiar with the matter said this month.
Sun jumped 79 percent on March 18, the day the talks were first reported. Since then, the shares have dropped as much as 26 percent on concern that the acquisition may fall apart.
“I’m a little surprised that the board rejected it out of hand,” Falvey said. “Maybe there’s a little bit of brinksmanship going on.”
The collapse of the discussions was reported on Sunday by the Wall Street Journal.
Sun is the fourth-largest maker of servers, the computers used to run Web sites and corporate networks. IBM is the top vendor, so the combination would have paved the way for IBM to increase its lead over No. 2 ranked Hewlett-Packard Co to almost half the US$53 billion global market for the machines.
In the fourth quarter, server sales industrywide fell 14 percent, the most since the aftermath of the dot-com bust, as customers held off buying both costly and inexpensive systems, research firm IDC said.
Sun depends on servers for almost half its sales and counts General Electric Co and General Motors Corp among its customers. The company is poised to post a US$1.24 billion loss for the year ending June 2009, the average of six analyst estimates compiled by Bloomberg showed.
If the two sides agree to a deal, they may draw antitrust scrutiny over the market for the most powerful servers powered by the Unix operating system. IBM leads in sales of those machines, with a 36 percent share, while No. 2 Sun holds 28 percent, researcher Gartner Inc said.
The deal also would help IBM bolster its newly created unit for cloud computing, where providers rent out computing and storage so customers don’t have to buy their own equipment. Last month, Sun announced plans to offer the Sun Cloud Compute Service and the Sun Cloud Storage Service by this summer, entering a market projected to exceed US$40 billion by 2012.
The collapse of talks with IBM may force the company to pursue a deal elsewhere, with Hewlett-Packard and Cisco Systems Inc, which entered the server market last month, among possible suitors. Intel Corp chief executive officer Paul Otellini said last month that Sun had been approaching potential buyers over the past few months.
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College
RSS