IBM said to have withdrawn Sun takeover offer

Well, it looks like IBM might not end up purchasing Sun after all. We recently heard that the two companies could announce a merger last Friday. Now, we know why they stayed silent: the Wall Street Journal reports that Sun's board rejected a "formal acquisition offer" by IBM, prompting the latter to back out.

So, how did it all go wrong? The WSJ provides this (unofficial) account:

Sun's board is split over whether to do the deal, with a faction led by Sun's chairman and co-founder, Scott McNealy, opposing the transaction and a group led by Chief Executive Jonathan Schwartz in favor, said two people familiar with the talks. While the price of IBM's offer remained unclear -- some placed it at $9.10 a share, others at $9.40 -- some people familiar with the talks say price wasn't the biggest issue.

Sun argued that the offer gave IBM too much "optionality," or leeway to walk away from the deal, according to one person familiar with the talks. IBM believed that under the proposed framework, it would be fully committing to a deal.

Despite this less-than-auspicious development, a deal could still go through. The article goes on to quote another insider who claims Sun and Big Blue are keeping in touch, calling the situation "fluid." The WSJ comments that the two parties could simply be "hardening their positions only to strike a full deal in the near future."

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