IBM might buy Sun Microsystems

IBM has offered $6.5 billion to acquire Sun Microsystems. According to the Wall Street Journal, the purchase would bolster IBM’s portfolio in data storage and in government and telecommunications areas, which would position it as a stronger competitor to Hewlett-Packard.

People familiar with the matter cautioned that while talks are under way, a transaction might not occur. Ian Colley, a spokesman for IBM, declined to comment on questions about any talks with Sun.

Sun shares have plummeted over the past year, battered by the economy as well as competitors who have outpaced it in the competitive back-office computing market.

In recent months, Sun has approached a number of large tech companies in the hopes of being acquired, say people familiar with the matter. The world’s largest tech company, Hewlett-Packard, declined the offer, says a person briefed on the matter. A spokesman for Dell Inc., the world’s third-largest server maker, declined to comment.

According to Reuters, this would be IBM’s largest acquisition to date.

Sun, which was not available for comment, has long been cited as a takeover target for IBM, HP, Dell Inc or Cisco, which introduced a comprehensive set of data center products earlier this week. Bankers have said Sun has been searching for a buyer in recent months.

But the challenge of valuing Sun’s intertwined software, hardware and services businesses could put off potential buyers, analysts say. Sun has never fully recovered from the dotcom bubble burst in the early 2000s, when demand for its servers cratered.

IBM, which had nearly $13 billion in cash at the end of $2008, declined comment. Its largest acquisition to date is the $5 billion purchase of Canadian software maker Cognos in 2008.

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