IBM withdraws $7-bn buyout offer for Sun: report

Global IT major IBM has withdrawn its $7-billion buyout offer for computer hardware maker Sun Microsystems, says a media report.

"IBM withdrew its $7 billion bid for Sun Microsystems on Sunday, one day after Sun's board balked at a reduced offer," The New York Times reported "quoting three people close to the talks".

The report published online said IBM had a team of over 100 lawyers conducting due-diligence research on potential problems in buying Sun, ranging from those antitrust concerns to the entity's contracts with employees and IBM competitors.

Quoting one person familiar with the talks, after the legal review, IBM reduced its offer on Saturday from $9.55, "the proposal on the table late last week, to $9.40".

"The offer was presented to Sun's board on Saturday, and the board balked. The Sun board did not reject the offer outright, but wanted certain guarantees that the IBM side considered onerous," the publication said quoting a person familiar with the talks.

According to the daily, Sun then said, it would no longer abide by its exclusive negotiating agreement with IBM. And on Sunday, IBM's board decided to withdraw the offer.

Attributing to second person close to negotiations, the report noted the breakdown in talks "came over the shifting balance of price and conditions for the deal".

The daily said that IBM scrutinised the "change of control" contracts with Sun Microsystems' executives, senior engineers and managers.

"IBM felt that the payments to senior employees were higher and extended more broadly across the company than it had anticipated. IBM pointed to the change of control contracts as one reason it was reducing its offer price," the daily added.

Sun Microsystems was most concerned about securing tighter provisions to restrict IBM's ability to walk away from the deal, the publication pointed out.

"Whether the IBM decision amounts to a negotiating tactic to get agreement on the final sticking points is unclear...," the report said.

The New York Times said that the deal's collapse after weeks of negotiations raises questions about Sun Microsystems' next step, since the IBM offer was far above the value of the Silicon Valley company's shares, "when news of the IBM offer first surfaced last month".

Sun Microsystems, an innovative pioneer in computer workstations, servers and Internet-era software, has struggled in recent years and spent months trying to secure a suitor, it added.