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Sun Sinks as IBM Deal Hits Snag

Sun's stock slumps following reports that IBM may not buy the company.

Updated from 12:14 9.m. EDT

Shares of

Sun Microsystems

(JAVA)

were nosediving Monday following reports that

IBM

(IBM) - Get International Business Machines (IBM) Report

is withdrawing its offer to buy the company.

IBM took its offer

off the table

this weekend after Sun terminated IBM's status as its exclusive negotiating partner, according to the

Associated Press

. A report in

The Wall Street Journal

suggested the sides might not have completely ended the discussions.

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Still, Sun's shares were plunging 23.2% to $6.52 on news that talks between had broken down. The company's stock had initially

exploded

on the

M&A talk

, rising almost 80% to to $8.91 at one point last month.

Price has reportedly been a

major sticking point

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in the negotiations between the two firms, with reports emerging last week that IBM had

forced

the value of the deal down.

Earlier discussions reportedly centered on a $6.5 billion price tag, although

The New York Times

and

The Wall Street Journal

reported last week that IBM would probably pay between $9 and $10 a share for Sun, down from a price of about $10 to $11 a share.

The deal, which would be IBM's largest-ever acquisition, was seen as

highly opportunistic

for the Armonk, N.Y., firm.

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 firm would also inherit the MySQL database technology which Sun bought for a billion dollars last year, and could also Sun to beef up its

cloud computing strategy

.

By buying Sun, IBM would also increase the pressure on its rival

Hewlett-Packard

(HPQ) - Get HP Inc. (HPQ) Report

, effectively shrinking the server market to just a handful of big-name companies.

An acquisition, however, would also see IBM

inherit

Sun's problems. The Santa, Clara, Calif.-based firm has earned a reputation for underperforming and has been dogged with execution issues and losses in the last few years.

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