IBM to acquire Sun for $6.5bn in cash; the two companies account for two-thirds of the global market of high-end servers

According to Financial Times, IBM and Sun Microsystems were in talks on Wednesday over the possible acquisition – which would be valued at $6.5bn (€4.8bn) in cash. Of course, as any deal of such significance, it would face intense antitrust scrutiny. The two companies account for 2/3 of the $25.5bn global market for high-end servers. The deal could let IBM build scale and cut costs sharply while boosting its computer hardware business in the slow-growing server market.

IBM seams to have a stable financial position as it grew revenues 4.90% in 2008 from 98.79bn to 103.63bn while net income improved 18.40% from 10.42bn to 12.34bn. Also cash reserves at IBM fell last year by 2.25bn, the company earned 18.81bn from its operations for a Cash Flow Margin of 18.15%. In addition the company used 9.29bn on investing activities and also paid 11.83bn in financing cash flows.

SUN cannot write up a similar statement. Its net income fell 14.80% last year, from 473.00m to 403.00m, despite flat revenues. A contributing factor has been an increase in costs as a percentage of sales from 27.76% to 28.49%. In 2008, cash reserves at Sun Microsystems fell by 1.35bn. However, the company earned 1.33bn from its operations for a Cash Flow Margin of 9.57%. In addition the company used 66.00m on investing activities and also paid 2.61bn in financing cash flows.

About IBM:
IBM’s major operations include Global Technology Services segment (GTS), Global Business Services segment (GBS), Software segment, Systems and Technology segment, and Global Financing segment.
Latest IBM acquisitions:
• On January 31, 2008 IBM acquired 100% of Cognos, Inc.
• On April 3, 2008, IBM acquired 100% of Telelogic, AB.
• In July 2008, IBM acquired Platform Solutions, Inc. (PSI).

About SUN:
Sun Microsystems offers core brands, such as the Java technology platform, the Solaris Operating System, the MySQL database management system, Sun StorageTek storage solutions and the UltraSPARC processor. Its network computing platforms are used by search, social networking, entertainment, financial services, manufacturing, healthcare, retail, news, energy and engineering companies.
Latest SUN acquisitions:
• On February 25, 2008, SUN acquired MySQL AB (MySQL), based in Uppsala, Sweden.

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