US computer and technology giant IBM is close to acquiring high-end computer maker Sun Microsystems in a deal worth around $7 billion, at a much lower price than discussed earlier, The Wall Street Journal reported.
IBM will now pay a reduced price between $9 and $10 a share for Sun Micro against a price of $10 and $11 the two companies were discussing earlier, the report said. The price of Sun Micro shares almost doubled to $8.8 following reports of the deal.
IBM, however, has committed to go through the deal in the face of antitrust scrutiny. The merger, if realised, would be IBM's largest acquisition so far and could prompt an antitrust challenge in the US because a combined IBM and Sun would have a 42 per cent share of the computer server market.
Founded in 1982, Sun is the seventh-largest company in Silicon Valley with reported annual sales of $13.9 billion.
Buying Sun would help IBM widen its lead over Hewlett- Packard Co in the $53.1 billion market for computer servers. (See: IBM bidding to take over Sun Microsystems: report)
IBM would then be the dominant supplier of high-profit Unix servers and related technology.
Sun, based in Santa Clara, California, has been witnessing sluggish demand for its products over the past few years and the economic downturn has worsened its prospects in the back-office computing market as well.
A Sun executive told the newspaper that the slowdown in the US economy had impacted the company more than its rivals as it sells big, expensive servers to corporate customers in the US financial and telecommunications sectors, which have been hit hard by the downturn.
Sun has projected a low single-digit in revenue growth for the next full fiscal year but does not expect any growth in US sales for the next six months.
Sun Microsystems said it is laying off 1,500 workers, as part of a plan, announced last fall, to lay off 18 per cent of its work force, or up to 6,000 jobs.
In a notice sent to the Florida Agency for Workforce Innovation, Sun Microsystems also said it is laying off nine workers in Tampa, 11 in Fort Lauderdale, three in Jacksonville, 12 in Orlando and one in Tallahassee.
Sun had last fall said the cuts were part of a corporate restructuring plan necessitated by falling demand.