Talks between computer giant IBM Corporation and server maker Sun Microsystems Inc have broken after Sun rejected IBM's offer of $9.40 or below a share, sources close to the development said.

While talks between the two ended, reports said, the board of Sun Microsystems is split over the deal. ''CEO Jonathan Schwartz wants the IBM deal, chairman and Sun founder Scott McNealy doesn't,'' the Wall Street Journal reported quoting sources.

While Sun, with its hardware roots, struggle to find business, it would have to explain the failure of the buy-out talks to its customers and shareholders.

IBM is also reported to have lowered its offer price for Sun by 50 cents from the earlier offer of $9.50/9.55 a share.

There were, however, no comments from both IBM and Sun Micro over the failure of talks. It is also unclear if the two would resume talks.

Shares of Sun Microsystems had vaulted to $8.49 on Friday from $4.97 on 17 March, a day before reports of talks between the two technology companies emerged. IBM shares have also been rising since the start of the negotiations.

A successful conclusion of the buy-out wold have made IBM a clear leader in the high-end server market with a major share in the $45 billion overall server market.

Besides adding Sun's storage products, IBM would also have broadened its software portfolio, enabling it to compete with EMC Corp, Network Appliance Inc and Cisco Systems Inc.

But the collapsed deal would affect Sun more than IBM, which has fared relatively well despite the global economic downturn.

Sun may have to look for another buyer or be content with the IBM offer, according to analysts. It is yet not known if Sun has a rival suitor.

Shares of Sun Microsystems Inc tumbled 24 per cent to $6.44 in pre-market trading after the company rejected IBM's $7 billion offer.

 IBM's offer of $9.40 per share or below represented a premium of up to 89 per cent on Sun's shares before deal talks were first reported last month.