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From: E_K_S4/2/2009 1:40:56 PM
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April 2, 2009 10:38 PST

IBM lowers bid for Sun Micro deal commitments: WSJ
New price for Sun Micro $9-$10 a share range: WSJ

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To: Charles Tutt who wrote (64777)4/2/2009 2:34:21 PM
From: Mark O. Halverson
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WSJ article


IBM Lowers Takeover Bid for Sun Article
By MATTHEW KARNITSCHNIG and HEIDI N. MOORE

International Business Machines Corp. has cut its intended takeover price for Sun Microsystems Inc. to between $9 and $10 a share, according to people familiar with the matter.

Sun has agreed to accept a lower price in return for stronger commitments from IBM that it will complete the deal even if it faces intense regulatory scrutiny, the people added.

The two sides continue to negotiate the precise terms of those assurances, however, and it remains unclear when the two sides will reach a deal, the people said. The companies were previously discussing a price in the $10- to $11-a-share range.

Sun is concerned regulators could hold up a deal for months and impose conditions on its completion as part of the government's antitrust review. Should that occur, Sun's board wants to limit IBM's ability to exit the deal.

Sun shares were trading at $8.15, up 15 cents, in afternoon trading on the Nasdaq Stock Market. The company currently has a market value of about $6 billion.

Sun is concerned regulators could hold up a deal for months and impose conditions on its completion as part of the government's antitrust review. Should that occur, Sun's board wants to limit IBM's ability to exit the deal.

Legal experts said any deal stands to face close antitrust scrutiny, especially in the market for server computers sold to big corporations and governments around the world.

After a deal, the combined companies would account for 42% of total server market revenue--65% of the market for servers based on the Unix operating system. The companies will also account for nearly half of all revenue from tape-storage systems.

A Sun spokeswoman declined to comment. A request for comment from IBM wasn't immediately returned.

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To: Mark O. Halverson who wrote (64782)4/2/2009 2:51:19 PM
From: Mark O. Halverson
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Re Sun takeover: First, I think Southeast Management, which holds a 22 percent interest in Sun, is behind the shopping around that led to the purported acquisition. Sadly, it appears that actual, final takeover will be months from now, given antitrust scrutiny. While 9-10 dollars per share instant cash might be okay, given the situation, 9-10 per share delayed a year is not so good. However, Sun having shopped itself to IBM, it has burned the bridges behind itself, as its customer base must be extremely disenchanted over it all.

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To: Mark O. Halverson who wrote (64783)4/2/2009 3:03:51 PM
From: E_K_S
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Hi Mark - They did better than SGI.

EKS

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From: E_K_S4/2/2009 6:44:31 PM
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IBM in talks to buy Sun Micro for $9.55/shr-source
Thu Apr 2, 2009 6:33pm EDT
reuters.com 
BOSTON, April 2 (Reuters) - International Business Machines Corp (IBM.N) is in talks to buy Sun Microsystems Inc (JAVA.O) for $9.55 per share, a person familiar with the situation said on Thursday.

The person was not authorized to speak publicly about the deal. (Reporting by Jim Finkle; editing by Jeffrey Benkoe)

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From: E_K_S4/5/2009 6:06:38 PM
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IBM and Sun broke off acquisition talks: report
finance.yahoo.com 
Reuters) - International Business Machines Corp (NYSE:IBM - News) and Sun Microsystems Inc (NasdaqGS:JAVA - News) broke off talks aimed at a $7 billion acquisition, the Wall Street Journal reported on Sunday.

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To: E_K_S who wrote (64786)4/5/2009 8:35:00 PM
From: Sr K
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TECHNOLOGY APRIL 6, 2009
IBM, Sun Talks Teeter Over Price

By WILLIAM M. BULKELEY and DON CLARK

Talks between International Business Machines Corp. and Sun Microsystems Inc. were at risk of unraveling, threatening to undermine a potential $7 billion acquisition that would place one of Silicon Valley's iconic companies under the Big Blue umbrella.

People familiar with the situation said Sun's board rejected a formal acquisition offer by IBM on Saturday. They said the board believed IBM's offering price, believed to be $9.40 or below, was too low. Sun also feared that the offer gave IBM too much "optionality," or leeway to walk away from the deal, according to one person familiar with the talks.

Late-stage deal negotiations are often full of brinkmanship, and it's possible the two sides are hardening their positions only to strike a full deal in the near future.

A person familiar with the situation said that Sun has sent a notice terminating IBM's agreement for exclusive negotiations. In return, IBM has withdrawn its offer to buy Sun, said a person informed about the situation. But another person familiar with the negotiations suggested the situation was "fluid" and the parties were still in touch by phone.

Word of talks between the two companies first came last month in The Wall Street Journal. Neither Sun nor IBM confirmed they were in negotiations by press release or Securities and Exchange Commission filings.

The stakes are higher for Sun than for IBM: Sun has no other prospective suitors, and without a deal, its stock price would likely sink to the $4 to $5 range, where it traded before news of the talks last month.

For IBM, a purchase of Sun would represent the biggest deal in the century-plus history of a company that has become the world's biggest provider of computer services, its second-biggest software company and the biggest vendor of large computer servers. IBM's interest in Sun was spurred by its desire to gain clout in the growing market for "cloud computing," a loosely defined business in which customers rent computing power from remote locations via the Internet instead of buying machines and software of their own.

IBM was especially interested in Sun's software and the community of developers using Sun's freely available Solaris, Java and MySQL software products. It also thought Sun could help it fight Microsoft Corp. by providing free alternatives to the Windows operating system.

When word of talks were first broke, investors expected Sun to fetch $10 to $11 a share. But the price apparently came down as Sun demanded assurances that IBM would proceed with the deal in the face of anticipated regulatory challenges.

Some antitrust lawyers had predicted IBM would have a hard time getting clearance for the deal in both the U.S. Justice Department and the European Union because the companies have overlapping product lines. The computer maker could have opted to spin off Sun's tape-based storage systems, as a merger would have given IBM nearly 100% of that market. But the combination would have also have given IBM about 65% of the $17 billion market for servers that use the Unix operating system, according to the market research firm IDC.

People familiar with the situation say IBM's lawyers had satisfied themselves that there were no impediments to a merger lurking in Sun's licensing and contracts. In its preliminary talks, Sun agreed to take a per-share price of $9.55, about $1 a share lower than expected, in order to get IBM to promise to conclude the deal even if regulators forced some divestitures.

The apparent impasse in the talks with IBM won't necessarily attract other suitors to Sun. People familiar with the situation say Sun's investment bankers approached most large information-technology firms during the winter after IBM expressed interest in an acquisition, and all passed.

A takeover of Sun would mark an inglorious end for a company that remained a Silicon Valley leader even as its financial fortunes languished. Sun's stock-market value topped $200 billion during the Internet bubble, but the company never fully recovered from the ensuing bust. Yet it retains a slew of loyal customers and a trove of potentially valuable software and technology.

If talks collapse, Sun would face pressure to find other plans to bolster its stock price, which had fallen 79% in 2008. Sun's shares traded at 4 p.m. Friday at $8.49, up 28 cents. That's nearly 71% above their price before reports that the two companies were in takeover talks.

Toni Sacconaghi, an analyst with Sanford C. Bernstein, said the Sun "board is going to have a lot of explaining to do if they turned down an offer of $9.40 a share." He noted that Sun's stock price during the fourth quarter was between $3 and $4 a share and that the outlook for tech spending has deteriorated since then. He added that the public disclosure of the talks with IBM "casts uncertainty among customers about Sun's future."

"This is very disappointing," said an investor who holds Sun shares. "However," he said, "if Sun felt that IBM wouldn't promise to take on antitrust regulators and proceed with the deal under most conditions, it's understandable that the Sun board turned it down." He added: "The Sun board isn't stupid. They must have a reason for doing it."

In Silicon Valley, rivals poked fun at IBM for pursuing the fading company. But IBM -- whose earnings have grown $5 billion since 2004 to $12.34 billion last year -- has been outpacing most of Silicon Valley recently, and would stand to leverage Sun into even more gains. Adding Sun's $13 billion in sales would put IBM neck-and-neck with Hewlett-Packard Co. as the world's largest information-technology purveyor, with combined revenues of $117 billion and 41% of the $50 billion server market.

Although Sun gets only 6% of revenue from software, IBM believed Sun's software has an outsize impact on the university-based and entrepreneurial software developers whose work pushes advanced technology like cloud computing. Sun has software called VirtualBox that competes with other popular "virtualization" software for servers that is critical in making cloud computing effective. It is starting a cloud-computing service called Sun Cloud that sells computing power in competition with Amazon Inc.

"Sun is providing a model that can be commoditized. IBM doesn't have that consumer end," says Habeel Gazi, an analyst with Info-Tech Research, London, Ontario.

Write to William M. Bulkeley at bill.bulkeley@wsj.com and Don Clark at don.clark@wsj.com

online.wsj.com 

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From: Arthur Tang4/6/2009 4:06:07 AM
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In all my dealings with IBM, there always is a test of cooperation with IBM culture(how their management does things).

Sun management did not have enough dealings with IBM to understand their culture. So, the deal was withdrawn.

In order to salvage the deal, Sun has to study IBM culture.

However, there are not too many companies that can afford to buy Sun, not HP(always short of cash to expand which they are still doing). Fujitsu has limited credit, had to sell hdd factory. Others did not have a business complementary to SunMicro.

This saga will go on. But when IBM stock did not retreat and Sun did not move up accordingly; the deal is not properly valued on Wall street. So, arbitrageurs are not in play. Sun needed investment bankers to value their company properly(growth potential of their service business)?

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From: QwikSand4/6/2009 4:47:52 AM
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Doesn't every acquisition negotiation in the galaxy proceed through a yes-no-yes-no cycle?

The supposed $9-10 price range always seemed ridiculous to me. There's so much speculation in the media about why IBM is contemplating this buy, but nobody really knows. My own speculation is they're just ready to pay to eliminate a competitor, but not to pay very much. IBM may do just as much to eliminate Sun by making it generally known that its future is a blank. Now Sun has a tougher time winning competitive bidding situations and is left with nothing but servicing their current (shrinking) customer base.

If the withdrawal of this offer is real rather than a negotiating ploy, what does Sun do next? That is the question. Sun's in no position to do much negotiating. They'll be back saying it's just peachy for IBM to walk away if there's DOJ issues.

--QS

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From: Arthur Tang4/6/2009 6:14:09 AM
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Hire an investment banker to value Java as an on going concern and how much it is worth to IBM culture?

Arbitrageurs buy Java and speculate to sell to IBM, will develop competitive bids?

IBM is looking for service growth, or potential customers beyond their own 2200+. Java's asset is the large number(50,000 to 85,000) of developers in many data centers, all potential service customers if hardware gets obsoleted?

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