It's the biggest proposed deal in tech this year, and IBM ( IBM) and Sun Microsystems ( JAVA) may not make it happen.

Tech Report: IBM

In an update of its original story reporting the takeover terms at around $10 a share, putting the value of the deal at $6.5 billion, The Wall Street Journal says the two companies are still talking.

The Journal's update adds that "the first report came relatively early in the process, when IBM and Sun hadn't had a chance to hammer out any differences into a merger agreement."

To investors watching the action, the latest news confirms suspicions that one side -- presumably Sun -- leaked the story to help prod IBM and possibly scare up a bidding war by other interested parties.

In recent days, the share prices of the two companies have been heading in opposite directions. Sun is down 9.5% from its deal new peak March 18. IBM is up 4% this week as investors get the sense that it may not be interested in the $10 a share price tag.

"I have a strong belief that there's no way a deal gets done at anything above $6 a share, if at all," says one money manager who has positions in the stocks.

If Sun's camp thought leaking the details would help seal the deal at favorable terms, the move may have backfired, says the investor.

Sun's business has been eroding and it is likely that customers put a freeze on orders as they await the outcome of the talks with IBM. One of the big concerns is that if the IBM deal happens, Sun's Solaris products will eventually be discontinued.

The longer the still-unconfirmed talks drag on, the more Sun's shares will slip, giving IBM no real incentive to act fast, say the speculators.

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