IBM in Discussions with Sun for Possible Buyout

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Sun Microsystems, Inc. is reported to be in negotiations for a possible $6.5 billion sale to IBM, a deal that would shake up the global tech industry and spell the end of an esteemed but now-struggling Silicon Valley pioneer.

The talks were reported this morning by the Wall Street Journal, which cited unnamed sources familiar with the matter. A Sun spokeswoman declined comment on the report; an IBM spokeswoman said she could not immediately comment.

Sun’s stock immediately surged to close at $4.97 on Tuesday, and ended the day closing at $8.89 - the highest the stock has been for the past 6-months. Frankfurt-listed shares of Sun also surged 61 percent in wake of the report.

Speculation about a possible sale of Sun has swirled since last summer, as the company was struggling with slipping sales even before the recession hit other tech companies last fall. Sun, which is known for its Java programming language and has lately made a push into database programs and other open-source software, was seeing sales drop off in its core business of selling high-end computer servers and storage business.

IBM would effectively widen and increase their market share in the increasingly competitive $53.1 billion server market with rivals Hewlett-Packard, Dell and even Cisco announcing their entrance in the server market in ‘09.

The buyout of Sun Microsystems would signal the end of  one of the most respected companies in Silicon Valley. Sun was founded in 1982 by Stanford graduate students Scott McNealy, Andy Bechtolsheim and Vinod Khosla with Bill Joy from Berkeley, the primary developer of BSD, joining Sun soon after.

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