Shares of Sun Microsystems plunged over 20% on Wall Street last night after reports that computer giant IBM had withdrawn its $7 billion takeover bid.
Sun's slide followed reports in The Wall Street Journal and other publications that Sun's board had rejected a formal acquisition offer by IBM on Saturday, claiming that the offer price from 'Big Blue' was too low.
The newspaper said Sun's board had sent a notice terminating IBM's agreement for exclusive negotiations on a buyout, effectively breaking off the talks. In return, IBM withdrew its offer to buy Sun, the Journal said.
IBM last week cut the price of its takeover bid to between $9-10 per share from £10-11 per share.
A purchase of Sun would have been the largest in IBM's history, in line with chairman Samuel Palmisano's recent pledge not to sit back but rather engage in 'strategic acquisitions'.
IBM is one of the few major US corporations to have weathered the global economic slowdown, ending 2008 with $12.9 billion in cash.
Several analysts questioned the benefits for IBM to purchase Sun, which owns the rights to the Java programming language and MySQL open source database software, but has been running up big losses recently. An IBM-Sun deal also appeared certain to have drawn the attention of competition regulators.
According to the Journal, the combined companies would have accounted for 42% of total server market revenue and 65% of the market for servers based on the Unix operating system. IBM is the largest server manufacturer, followed by Hewlett-Packard, Dell and Sun.
