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Technology Rumor Confirmed: IBM, Sun

Confirming earlier speculation, 'The Wall Street Journal' says that price has been a major stumbling block on the road to a merger between IBM and Sun Micro.

So, price does seem to matter to


(IBM) - Get Report


Confirming speculation reported

here on March 20


The Wall Street Journal

, citing people familiar, says that price has been a major stumbling block on the road to a merger between IBM and

Sun Micro



The price of the still unconfirmed deal has dropped to between $9 to $10 a share, according to a the latest

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When first reported, the terms called for IBM to pay $10 to $11 a share or a total of $6.5 billion for Sun. The eye-popping price represented a 100% premium over Sun's recent share price, and it sparked question as to whether IBM was overpaying for the slumping server shop.

Sun swung to a massive $1.8 billion loss last year on an 11% drop in sales. Some analysts have estimated that Sun's losses will dilute IBM's earnings by 5 cents a share if the deal goes through.

On Tuesday, the



the original story, saying 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 8% since the stock peaked after the deal was reported on March 18. And IBM is up 4% this week as investors get the sense that it may not be interested in the $10 a share price tag.

At least one investor who has positions in the stock predicted this week that the price would be much lower, if they manage to strike a deal at all.


overhanging problem

is that Sun's business has been eroding, say people following the deal. And the potential takeover by IBM may cause Sun customers to put off on orders on new Sun gear as they await the outcome of the talks.