Sun Shares Soar on Report of IBM Bid

The battle for the data center is heating up quickly. Shares of Sun Microsystems (JAVA) soared at today's opening after a report that the company is in talks to be acquired by IBM. The Wall Street Journal said that IBM has discussed an offer of $6.5 billion for Sun, a huge premum over the recent trading range of about $5 a share.

Sun shares soared 66 percent at the opening bell, up $3.28 to $8.25 a share.

The deal comes on the heels of Monday's announcement that networking giant Cisco Systems (CSCO) is entering the server business, a development that has raised expectations of a competitive response from leading server vendors IBM, HP and Dell. Buying Sun would extend IBM's status as the largest server vendor, and build on the company's strengths in data center design and Green IT.

The Journal reported that the talks between IBM and Sun were in flux, but that a deal could be completed as early as this week. The paper said Sun has been shopping itself around, and had sought to discuss combinations with HP and perhaps Dell.

IBM and Sun share a focus on the data center and an emphasis on open source software, and are each expanding their focus on data center services and the emerging market for cloud computing. 

As Sun's share price has eroded in recent months, some investors have been pressuring the company to make a deal. Last fall Southeastern Asset Management increased its stake in Sun to 21 percent and said in an SEC filing that it “will have additional conversations with management and/or third parties, regarding opportunities to maximize the value of the company.”

In recent months Sun has joined the growing crowd of companies providing data center design services to help companies improve the energy efficiency of their facilities, launching consulting services to help customers retrofit existing data centers and design new ones. Sun has sought to showcase its green approach with retrofits of major data centers in Santa Clara and Broomfield, Colo. 

Sun was also an early player in the market for data center containers with its Blackbox (since renamed the Sun MD S20) and has acquired open source database software MySQL and cloud computing startup Q-Layer.