IBM to Buy Sun

The markets are buzzing this morning with the news that IBM (IBM) is about to buy Sun Microsystems (JAVA) for $7 billion. Shares of JAVA are up about 60% in this morning’s trading.

This would be a bold move on IBM’s part because Sun hasn’t been a very strong stock lately. For the fourth quarter, JAVA’s earnings-per-share dropped from 50 cents to 15 cents, and sales dropped by 11%. Whenever profits drop faster than sales, you know that profit margins are under pressure. As a result, the company has announced substantial job cuts.

My take: I rate IBM a buy, but I don’t think this is a smart move on their part. Sun will most likely be an underperforming asset probably for the next several quarters.

More Louis Navellier

Twitter

Facebook

RSS Feed

Little Book

InvestorPlace Network

InvestorPlace.com

https://orders.investorplace.com/chain?cid=MKT427092&eid=MKT473286&encryptedSnaid=&snaid=&step=start