Has IBM pulled out of $7b offer for Sun Microsystems?

IBM withdrew its $7 billion bid for Sun Microsystems on Sunday, a day after Sun’s board balked at a reduced offer, according to three people close to the talks.

The deal’s collapse after weeks of negotiations raises questions about Sun’s next step, since the IBM offer was far above the value of the Silicon Valley company’s shares when news of the IBM offer first surfaced last month. Sun, an innovative pioneer in computer workstations, servers and Internetera software, has struggled in recent years and spent months trying to secure a suitor. With IBM and others shying away from a deal, a bruised Sun could be forced to continue pursuing a solo business model whose prospects have been questioned by many analysts.

After the legal review, IBM shaved its offer on Saturday from $9.55 a share, the proposal on the table late last week, to $9.40 a share, said one person familiar with the talks. The offer was presented to Sun’s board on Saturday, and the board balked. The Sun board did not reject the offer outright, but wanted certain guarantees that the IBM side considered “onerous,” according to that person. Sun then said it would no longer abide by its exclusive negotiating agreement with IBM, a second person familiar with the discussions said. On Sunday, IBM’s board decided to withdraw the offer.

The breakdown in the talks, said the second person close to the negotiations, came over the shifting balance of price and conditions for the deal.

For example, IBM scrutinized the “change of control” contracts with Sun executives, senior engineers and managers. IBM felt that the payments to senior employees were higher and extended more broadly across the company than it had anticipated. IBM pointed to the change of control contracts as one reason it was reducing its offer price.

The breakup of the deal, analysts say, is a blow to Sun’s prospects. “For IBM, given its size, this was never a transformational deal,” said A M Sacconaghi, an analyst for the investment research firm Sanford C Bernstein.

“But in Sun’s case, it’s an extremely material event.” “This leaves Sun in a tough situation,” Sacconaghi added. “Sun was on a path to selling itself, and this will inevitably raise questions in customers’ minds, no matter what Sun says, about its commitment to a go-it-alone strategy.”

Sun was most concerned about securing tighter provisions to restrict IBM’s ability to walk away from the deal.

Whether the IBM decision amounts to a negotiating tactic to get agreement on the final sticking points is unclear. Though the offer is off the table for now, the two sides could resume bargaining if Sun’s share price drops from its $8.49 close on Friday and major investors pressure the company to come to an agreement. “There’s lots of testosterone going back and forth,” said a third person familiar with the discussions. All three people who discussed the deal would speak only on condition of anonymity because details of the merger talks are confidential.

Agencies

Own a personal supercomputer!

US technology firm NVIDIA rolled out high-performance “personal supercomputers” that let desktop workstations handle mind-boggling tasks once far beyond their capabilities.

Computers built with innovative NVIDIA graphics processing units (GPUs) are capable of handling calculations typically relegated to expensive supercomputing “clusters”, a technology breakthrough the company says could soon bring lightning speeds to the next generation of computers aimed at the consumer market.

NVIDIA’s Tesla Personal Supercomputers deliver approximately 250 times the processing power of current computer workstations for similar prices, according to the California-based company. “This changes everything. This supercomputing power is being brought to the workstation,” Tesla computing products general manager Andy Keane said.

Massachusetts Institute of Technology and other universities and research facilities are already using GPU-based personal supercomputers. “GPU-based systems enable us to run life science codes in minutes rather than the hours it took earlier,” said Jack Collins of the Advanced Biomedical Computing Centre in the US state of Maryland. “This exceptional speedup has the ability to accelerate the discovery of potentially life-saving anti-cancer drugs.”

NVIDIA, founded in 1993, became renowned for GPUs that drive sophisticated computer game and video hardware. While CPUs typically handle tasks in a linear style, zipping from start to finish in series, GPUs work on tasks simultaneously in order to do things such as get colour pixels together on screens to present moving images. Sets of NVIDIA chips built for speed, power, and superior graphics production are built into upgraded Macintosh notebook computers recently rolled out by Apple.

GPUs that could do parallel computing mathematics at lightning speed were engineered by NVIDIA to make Tesla chips that put desktop workstations on par with supercomputers at one 100th of the price. “You can’t ignore the GPU; you can’t say it is just a game chip,” Keane said.