Why an IBM Acquisition of Sun Is Likely a Done Deal

By Chris Preimesberger  |  Posted 2009-03-19 Print this article Print

When it comes to the rumored IBM acquisition of Sun Microsystems, all that remains is for the ink on the legalese to dry. That's what several eWEEK sources are telling us. The report was that IT infrastructure company IBM would acquire Sun for approximately $6.5 billion. It's a large number, but it is specific, and that is a key indicator of authenticity.

All the indicators point one way: The acquisition of one of the most innovative, risk-taking and open-source-minded IT companies in the world, Sun Microsystems, by the world's oldest and arguably largest IT corporation, IBM, is a done deal.

All that remains is for the ink on the legalese to dry. That's what several eWEEK sources are telling us.

Click here to read more about what acquisition by IBM could mean for Sun Microsystems.

"With the level of detail that came out [March 18], that pretty much makes it a done deal," Brian Babineau, an analyst with Enterprise Strategy Group and one of those sources, told eWEEK.

The report was that IBM would acquire Sun for something in the neighborhood of $6.5 billion. It's a large number, but it is specific.

"For example, when HP [Hewlett-Packard] bought Mercury Interactive [for $4.5 billion] in 2006 and when it bought EDS [for $13 billion] last year, those stories had numbers on them, and they were done deals by the time that came out," Babineau said. "This deal is probably 95 percent done. It's just a matter of getting all the legal paperwork signed and delivered."

It had better be done. Because if it's not, then Sun's looking at a pretty miserable time over the next 12 months.

Why? Because shareholders have a good idea of what the company is now worth on the open market. Also, based on the reports, the stock price zoomed up almost 80 percent on March 18 to about $9 per share. Today, March 19, the stock was down a tad, so there was profit-taking going on, as is to be expected.

If the deal does not happen, then Sun and all its brass-especially CEO Jonathan Schwartz-will be on the firing line for a long while, trying to explain why it fell through. They do not want that to happen.

Remember what happened to Yahoo in the 2008 failed attempted takeover by Microsoft? Co-founder and CEO Jerry Yang, who's personally popular among most Yahoo employees, had to endure a lot of sleepless nights trying to save face after that debacle.

Now he's not the CEO anymore.

Another factor in all of this: IBM is motivated to get this done as quickly as possible so that no other bidder (Cisco Systems, Intel, HP?) will come into the picture.

Because Sun has been losing boatloads of money for most of this decade, it would also behoove all concerned to have the company stop filing quarterly reports as soon as practicable.

So where does this leave us? Deep industry sources contacted by eWEEK all indicate that this deal could be announced as soon as March 20, or by early the week of March 23 at the latest. All depends on how fast the lawyers get their work done.

There is one more factor, though: Lawyers get paid by the hour.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on Salesforce.com and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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