Updated from 10:40 a.m. EDT

Deal speculation thrives in a vacuum.

Amid unconfirmed rumors of merger talks between IBM ( IBM) and Sun Micro ( JAVA), 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) 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) to form a satellite radio monopoly with XM.

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

IBM and Sun customers could grumble about the potential lack of competitive prices in a consolidated server market. Or, H-P might argue that the tie-up will hurt its business. Either way, regulators would have to start a review of the deal that could be lengthy.

Investors would face a year or more of uncertainty waiting to see if their positions will ultimately pay off.

Meanwhile, Dell ( DELL) has targeted the uncertainty around the deal by pushing a new line of servers with features like traffic monitoring and management. This is a big leap into the advanced server segment by a low-cost player known more for the generic appeal.

The concern is that efforts like Dell's will relegate Sun's proprietary Solaris system and its unique Sparc chips to a smaller portion of the market. Companies that have built systems on Sun technology now have to wonder how IBM will handle the assault and how long it will continue to support Solaris.

Sun shares, which surged to $9.24 on news of the deal discussions last week, were recently falling 2.2% to $7.88.

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