Intel CEO Still Weighing IBM-Sun Impact

Sun will eventually spin into IBM's orbit, predicts Intel's CEO.
Publish date:

Updated from 11:04 a.m. EDT


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will probably clinch its

rumored acquisition


Sun Microsystems


, according to


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Paul Otellini

, who told his employees that he is still undecided on whether the deal is good or bad for the chip giant.

"I can tell you that Sun was shopped around the valley and around the world in the last few months," he said, during a Q&A session that was revealed in a regulatory filing. "A lot of companies got calls or visits on buying some or all the assets of the company."

M&A talk first swirled around IBM and Sun last week. The deal is rumored to be worth around $6.5 billion, with IBM paying $10 or $11 a share for the struggling tech giant.

"It looks like IBM is in the hunt now," added Otellini. "And at a hundred and some odd percent premium, I suspect they'll get it."

More recently, however, some

buy-side analysts

have said that the deal may be closer to $8 or $9 a share than the original $10 to $11 figure.

As for the impact on Intel, which supplies processors for both IBM and Sun servers, Otellini still hasn't worked that one out.

"Is it good or bad for us? I don't know," he replied to an employee's question. "I'd rather have Sun be independent, I guess."

Intel, which is sitting on a

mountain of aging PC chips

, will be keen to see how the tech market shakes out during the coming months. Intel will unveil its next-generation


processor next week, and it needs to ensure that its existing routes to market remain open.

Otellini was also grilled on whether


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into the server market had forced IBM's hand, but he said that was unlikely.

"I don't know if the Cisco entry spurred IBM," he said. "I think

that the cheap Sun price -- a low price spurred a lot of interest -- I don't think it had anything to do with Cisco."

The executive said IBM is looking to consolidate software architectures. "By picking up Sun, which is the creator of Java, they really consolidate their position, not just in Linux, but also in Java."

Otellini, who was discussing Intel's recently-announced

stock option exchange program

, also touched on his firm's latest dispute with chip rival


(AMD) - Get Report


AMD recently announced a chipmaking


with tech-financing firm

Advanced Technology Investment

, prompting a sparring match with Intel, which claims that the joint venture violates a 2001 cross licensing agreement.

"As we looked at that, we feel very strongly that what they did is they violated certain terms of the cross license that we have between us and AMD," said Otellini.

The CEO said Intel had spoken to AMD privately about the issue, but the two firms were unable to resolve their differences.

"How do I see it playing out? Through the courts," he added. "We wouldn't have done this if we didn't think we had a really strong position -- why pick a fight if you can't win?