IBM could be close to making an offer to buy Sun Microsystems, with a purchase price of $7-billion said to be on the table.
According to insiders, a price of $10.00 per share is being negotiated – about double Sun's closing price on Tuesday. However, rumours boosted the share 79% to a new high of $8.89 yesterday.
Neither company will comment on the rumours.
According to a report in today's New York Times, Sun would be an attractive acquisition prospect for IBM and would offer not only servers but also software, systems design and research.
This would tie in with IBM's recent moves away from hardware dependence to a more software and services focus.
Sun may be struggling financially today, says the New York Times, but it has a history of technological innovation, having created Solaris and Java as well as its SPARC-based servers.
Analysts believe Solaris and Java are the main attractions. IBM already uses Java extensively in its software group and has its own Java development tools.
If Sun and IBM were to combine their Java efforts, they would present a more formidable opposition to Microsoft.
In addition, both companies are strong proponents of Linux and open source software.
Should the two companies tie up, they would hold a combined 65% market share for servers running Unix and 42% of the total server market.