IBM in talks to buy Sun

Boston - IBM Corp. is in talks to buy Sun Microsystems Inc. for at least $6.5bn in cash, a deal that would shake up Silicon Valley and the corporate computing market, The Associated Press has learned.

A person familiar with the situation told the AP of the negotiations, confirming an earlier report on Wednesday in The Wall Street Journal. This person spoke on condition of anonymity because the talks are ongoing.

The Journal cited unnamed people familiar with the matter and said the deal could occur as early as this week.

The report sent Sun shares soaring $3.05, up 61%, to $8.02 in morning trading. IBM shares were down $2.46, or 2.7%, to $90.45.

Armonk, New York-based IBM and Santa Clara, California-based Sun both make computer systems for corporate customers. A purchase of Sun could help IBM in the finance and telecommunications markets as it tries to expand its role in digitizing key pieces of infrastructure, from electric utilities to water supplies.

While some of their technologies and customers overlap, IBM and Sun have been heading in different directions for most of the past decade.

Sun, a darling of the dot-com era, has been struggling since the tech bust of 2001 to find its place. The company has cut thousands of jobs and tried to refocus on open-source software besides the proprietary systems it built much of its wealth on.

IBM, after an enormous restructuring in the 1990s, has proven one of the technology industry's most reliable earners. It has gobbled up dozens of companies in recent years. But a $6.5 billion deal would be its biggest to date.

It would represent a big premium for Sun, which closed trading Tuesday with a market capitalization of less than $4 billion. However, Sun's last quarterly report shows it with more than $2.6 billion in cash and securities that could be readily converted to cash.

- AP