The Wall Street Journal has reported that International Business Machines (IBM) is negotiating to buy Sun Microsystems (JAVA). The reported offering price is the astoundingly teensy sum of $7 billion. Even this small figure is a 50% premium over Sun's market capitalization as of yesterday's close of $4.92. IBM will probably have to increase its offer because during today's trading Sun's value doubled. It closed at almost $9 (market cap $6.7 billion).
As recently as 2007, Sun was trading around $25 (market cap $19.3 billion), so IBM is getting a pretty good deal.
But, the reason $7 billion sounds like pocket change to me is because back during the tech bubble Sun was trading at over $200/share *and* it had more shares outstanding. In fact, at its peak Sun had a market cap of $194 billion.
Wednesday, March 18, 2009
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Interesting post! I agree IBM is getting a great deal, though it does raise the question--what exactly is IBM buying? Lots of interesting technology that for some reason Sun has had trouble selling... Also, do you really think the ponytails can get along with the suits?
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