Intel's Otellini: IBM Likely To Buy Bargain Sun

Intel chief executive Paul Otellini said IBM’s discussions to acquire Sun Microsystems are likely to succeed for one ringing reason: Money Talks. During a chat with Intel employees earlier this week, Otellini said it is no surprise International Business Machines’s interest in the high-end computer maker comes in the wake of a plunge in Sun’s stock price.

“I can tell you that Sun was shopped around the valley and around the world in the last few months,” Otellini said in comments detailed yesterday in a filing with the US Securities Exchange Commission. “A lot of companies got calls or visits on buying some or all the assets of the company. It looks like IBM is in the hunt now. And at a hundred-and-some-odd-percent-premium, I suspect they’ll get it.” IBM is offering to pay as much as $8 billion, or $10 to $11 per share, The Wall Street Journal reported last week. That compared with Sun’s share price of $4.97 before the IBM talks were reported. The stock closed at $7.85 yesterday.

Sources with knowledge of the matter told Reuters IBM was in exclusive talks with Sun and IBM was examining Sun’s businesses as part of a due diligence process. Sun has long been cited as a takeover target for IBM, Hewlett-Packard, Dell or Cisco Systems, which introduced a comprehensive set of data centre products early last week. Asked if Cisco’s entrance might have spurred IBM to make a move on Sun, Otellini said, “I don’t think it had anything to do with Cisco.” “I think cheap Sun price – a low price – spurred a lot of interest,” he said, according to the filing.

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Before the reports of IBM’s interest, Sun’s shares were down more than 70 percent in the previous year. Still, Intel’s CEO said he could see how IBM could benefit from the deal. “I think IBM is trying to consolidate architectures,” he told Intel employees. “IBM has the strongest Java licence in the industry. By picking up Sun – which is the creator of Java – they really consolidate their position not just in Linux, but also in Java.”

In the end, Otellini remained unsure how he felt about a potential marriage of IBM and Sun, a deal that would combine the world’s No 1 and No 4 makers of computer servers. Intel counts both IBM and Sun as customers. “Is it good or bad for us? I don’t know,” he said. “I’d rather have Sun be independent I guess.” (Reuters)