Updated from 11:58 a.m. EDT
thinks there's a viable plan B in the form of a bailout from Congress.
The sinking server giant failed to reach a $7 billion takeover deal with IBM
Sun apparently balked at the lowered price and tried to get IBM to guarantee it would not abandon the deal, according to a
New York Times
Sunday. In reaction, Sun sought to tear up an exclusivity agreement and seek other bidders. At that point, IBM withdrew its offer.
So where does Sun go when it walks away?
aren't nearly as good a fit, or even interested, say analysts.
"IBM and Sun both need each other, and Sun's unlikely to find a new suitor," says Collins Stewart analyst Ashok Kumar. "An IBM/Sun deal is important to the sector's health and tech at large," says Kumar.
With the pressure of a slumping economy and forces like cutthroat competition, industries usually respond through consolidation. Fighting that trend hasn't proved to be a successful tactic from a shareholder perspective.
hostile offers, leading to a year-long battle and the replacement of Yahoo! executives. Yahoo! is now down 53% since February 2008, when Microsoft made its initial $31-a-share offer. Meanwhile,
continues to dominate the search business.
Another example is
. With plunging car sales and heavy costs, a combination with
could have been a big step to help reduce overlapping expenses and possibly keep the best of both companies moving forward. The deal never happened. GM is down 95% from its peak price in October of 2007, when Chrysler owner
started pursuing a deal.
Sun has struggled to find buyers for its Unix servers, and analysts estimate that in 2009 it will nearly double its losses of $1.8 billion last year. The Solaris hardware and Java software developer is in its ninth round of job cuts and has eliminated about 7,500 workers last year alone.
The fact that IBM was even interested in the slipping Sun helped highlight Big Blue's own struggles in the server segment. Under IBM, Sun's losses would be an immediate drag on earnings, but presumably IBM could make significant cuts and eliminate products and, let's face it, kill a competitor.
"This is low-hanging fruit for IBM," says Kumar. IBM can basically acquire Sun's customers and use its broad hardware product lineup to try and make money from Sun's Java software.
Without IBM, says Kumar, "Sun is a dead man walking."