IBM in talks to buy Sun Microsystems for $6.5 billion

East Fishkill (NY) and Santa Clara (CA) – IBM has Sun Microsystems is in its sights. As a result, Sun is profiting greatly on the news with stock prices up 66% in early trading. It’s being reported that IBM may have to pay considerably more than the $6.5 billion deal estimated as of stock price projections. Still, IBM’s CEO is adamant about fighting the recession with acquisition and research expansion.

IBM’s acquisition of Sun would be the largest in IBM’s history, and would help widen IBM’s lead over Hewlett-Packard in the server arena. IBM’s CEO, Sam Palmisano, said last week he would “go on offense” in the current economic climate by acquiring and investing in research.

Several analysts are predicting Sun will report its third consecutive quarterly loss, making the company ripe for takeover. Sun’s CEO, Jonathan Schwartz, has already cut 6,000 jobs and is offering lower-priced products to “weather the storm,” as it were. Now, with IBM’s interest being made public, stock prices are up $3.26 to $8.23 before markets opened (Symbol: JAVA).

There is also additional interest in Sun’s heavy focus on cloud computing. Later this year, Sun planned to introduce its Sun Cloud Compute service, which essentially rents out server space to whomever wants it, providing hardware and software services for a fee. IBM’s heavy involvement in cloud computing is also evident, and this may strengthen their interest in Sun as a buyout target.

If IBM bought Sun for $6.5 billion, it would be at an $8.75 per share price, which it is expected to top today. IBM may win up paying a premium for Sun if prices continue north, however, IBM could just as easily walk away.

See, The Wall Street Journal and Reuters republished on Yahoo News.