One of the stories behind the story of the still-unconfirmed merger talks between
The Wall Street Journal
, which first reported that the two IT giants were in merger discussions, updated that scoop Friday with a story about how due diligence has slowed down the process.
According to the story, IBM's lawyers are looking at Sun's "contracts and documents in an extensive due-diligence process that could take a number of days."
But while the discovery phase and legal steps are almost always part of the merger process, some people familiar with the deal say the actual holdup involves a discrepancy in the price of the deal.
The first report of the deal 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 and 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.
Not only does IBM appear to be involved in an expensive deal, the amount it is spending has also been a matter of dispute.
It isn't clear, for example, if the initial price of the deal, as reported, included the $2.4 billion in cash and investments on Sun's books. If so, the money would be absorbed into the merged company, putting the actual tab for IBM at around $4.1 billion.
As they say, time will tell.