Technology Rumor of the Day: Sun, IBM

Updated from 10:40 a.m. EDT

Deal speculation thrives in a vacuum.

Amid unconfirmed rumors of merger talks between IBM (IBM Quote) and Sun Micro (JAVA Quote), investors are mulling three major concerns about the stocks: price, regulatory review and product shelf life.

The price of the deal seems to be the biggest hang-up and the most crucial element for an investment community trying to gauge the premium IBM will agree to pay for Sun.

When The Wall Street Journal first reported the deal discussions last week, the preliminary terms called for IBM to pay $10 to $11 a share, or a total of $6.5 billion, for Sun. The price tag represented a 100% premium and immediately sparked questions about whether IBM was overpaying for a setting Sun.

Since then, some buy-side analysts, who have been probing the issue, say the price is likely to be closer to the $8- to $9-a-share range than the original $10 to $11 figure. These people say they still remain encouraged that terms will eventually be reached.

But another hurdle stands in the way of a quick marriage: antitrust review. IBM and Sun are the No. 1 and No. 2 players in the Unix server market, with Hewlett-Packard (HPQ Quote) No. 3, according to research shop IDC.

Under a previous administration, a combination of the top two players in a market could still pass competitive market scrutiny. Consider, for example, the Justice Department's blessing that allowed Sirius (SIRI Quote) to form a satellite radio monopoly with XM.

But under a new administration, its not clear that the pro-deal climate will continue.