As IBM Nears Sun, Tech Awaits Big Bang

With IBM's acquisition of Sun said to be imminent, the tech sector is bracing for the shockwaves.
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Updated from 10:37 a.m. EDT

IBM's

(IBM) - Get Report

rumored acquisition of

Sun Microsystems

(JAVA)

may happen as early as next week, according to reports, potentially creating a hardware and software behemoth that would transform the tech landscape.Tech giant IBM may soon reveal details of its largest-ever takeover, says

Reuters

, citing sources familiar with the deal, but warned that the price is still not final.

Although the acquisition is seen as

increasingly likely

, price has apparently been a sticking point in the negotiations between the two firms.

Earlier discussions reportedly centered on a $6.5 billion price tag, although IBM is said to have

forced

the value of the deal down. Both

The New York Times

and

The Wall Street Journal

said Thursday that IBM will probably pay between $9 and $10 per share for Sun, down from a price of about $10 to $11 per share.

There is already speculation about how a Sun/IBM merger could alter the tech sector, effectively leaving just a handful of firms jostling for a share of enterprise server spending. With

Dell

(DELL) - Get Report

yet to

assert itself

in data centers, a combined Sun and IBM would face off against

Hewlett-Packard

(HPQ) - Get Report

in the x86 server space and potentially

Cisco Systems

(CSCO) - Get Report

, which recently launched its

Unified Computing System (UCS)

.

All this market consolidation could create a headache for users, who would no longer be able to play Sun off against IBM, and the acquisition is likely to come under the antitrust microscope.

Other tech firms are also circling, ready to swoop down on any disgruntled Sun customers. Dell CEO Michael Dell, for example, plans to

exploit the uncertainty

surrounding the Sun/IBM deal. Sun accounts are very concerned about what will happen to the Solaris platform and Sparc microprocessor, he said recently.

The acquisition clearly raises plenty of questions, not least of which is the impact on IBM itself. In addition to the

significant overlap

in the firms' product lines, IBM would also inherit Sun's problems.

The Santa Clara, Calif.-based firm has earned a reputation for under-performing and has been dogged with execution issues and losses in the last few years, in sharp contrast with IBM. Despite the challenges, though, the deal is seen as highly opportunistic for IBM.

By gaining access to Sun's

Solaris operating system

customers, IBM could boost its presence in the lucrative oil and gas, telecom and government sectors. The Armonk, N.Y.-based firm would also inherit the MySQL database technology that Sun bought for a billion dollars last year, and may use Sun to beef up its

cloud computing strategy

.

IBM shares were recently up 1.4% to $102.25, and Sun shares were up 2.7% to $8.43.