The Sun Micro/IBM Deal Falls Apart

Three weeks ago, shares of Sun Microsystems (JAVA) soared on the news that it was being bought by IBM (IBM). At the time, I wrote: “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.”

Now we learn that the merger deal has fallen apart. Bloomberg reports:

“Sun’s board, led by co-founder Scott McNealy, told Armonk, New York-based IBM on April 4 it was breaking off exclusive talks, according to a person familiar with the situation. Sun, the developer of the Java programming language, rejected an offer of about $9.40 a share as too low, said the person, who declined to be identified because the talks are private.”

JAVA’s stock is down sharply this morning. I’m not sure what their next move will be. Perhaps they’ll search for another suitor. I think this news is a plus for IBM, and I’m still not recommending Sun Microsystems.

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