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IBM in Talks to Purchase Sun

Technology giant IBM ( is currently in talks to acquire Sun Microsystems (, offering to pay Sun at least $6.5 billion, or double Sun's Tuesday closing price of $4.97, according to a report on Reuters.

If the two companies reach an agreement it will be IBM's largest-ever acquisition, slingshotting the company to the forefront of the high-end computer server market.

In the past, IBM has mostly focused its acquisition efforts on companies that will bolster its software and services businesses, rather than its hardware.

Last year, the company made its largest acquisition to date when it purchased Canadian software developer Cognos for $5 billion.

Many analysts see the potential deal as a recent trend in consolidating major brands, where server equipment providers such as Hewlett-Packard, IBM and Cisco Systems compete for the lucrative corporate data center market to supply network equipment to high-end computers.

It has long been speculated that Sun would be bought out by a major IT company, and the company has been seeking a buyer in recent months, according to bankers.

HP, Dell and Cisco have all been cited as companies that were considering purchasing the company.

On Monday, Cisco introduced an aggressive data center strategy, releasing a set of new data center products for its Unified Computing System.

So far, IBM is leading the data center market as top supplier of servers in the fourth quarter of 2008, with a market share of 36.3 percent, says market researcher IDC.

Trailing behind in second place is HP with 29.0 percent, followed by Dell with 10.6 percent, Sun with 9.3 percent, and Fujitsu with 4.2 percent.

Meanwhile, Sun shares have decreased by 71 percent in the past year, as the company struggles to stay afloat by offering new services and software.

Sun said that it would soon cut 6,000 jobs, or 18 percent of its workforce.

The potential acquisition of Sun, along with the unveiling of Cisco's new data center strategy, may lead to new partnerships and acquisitions in the competitive data center market.

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