International Business Machines (IBM) may buy Sun Microsystems (JAVA) to bolster its position in the server market. If so, it would end the smaller company's years of poor management, layoffs, and pain for shareholders.
According to The Wall Street Journal, "If the deal does go through, which could happen as early as this week, IBM is likely to pay at least $6.5 billion in cash to acquire Sun." That would translate into an offer that is about double Sun's share price.It is hard to imagine why IBM would pay that kind of premium, unless it is concerned that one of its rivals like Hewlett Packard (HPQ) might take a run at a competitive bid.
With Sun trading at $5, the new offer would still put its share price well below the company's 52-week high of almost $17. Two years ago, Sun traded at $25, so the stock is down 80 percent since that time.
Sun has not been a viable stand-alone company since the "dot com" meltdown of 2001. Its server products could not compete with those of much larger companies. Layoffs could not help it keep up with falling profits.
If the deal closes, Wall Street won't have Sun to kick around any more.
Douglas A. McIntyre is an editor at 24/7 Wall St.