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IBM cuts offer but Sun still keen to complete

IBM cut its offer for Sun Microsystems Inc to US$9.55 a share after a thorough vetting and may soon unveil details of its largest takeover, according to an insider.

But the source said price was not final, although IBM had decided Sun Micro was worth less than thought after a weeks-long due-diligence process.

A merger would create a server industry powerhouse with a commanding 65 percent of the US$17-billion Unix server market, a dominance analysts say might trigger antitrust scrutiny and concerns from clients.

A deal at US$9.55 would still be a 92-percent premium on Sun's closing share price on March 17, the day before news of the offer emerged.

Sun agreed to a lower price in return for stronger commitments from IBM that it will complete the deal, even if it faces intense regulatory scrutiny, the Wall Street Journal said.

Sun would hand IBM a clear lead at the high end of the US$45 billion overall server market fought over with Hewlett-Packard Co.

It would broaden IBM's software portfolio, add storage products that vie with EMC Corp and Network Appliance Inc and provide an edge over Cisco Systems Inc, which some see as its biggest rival in the long term.

The Wall Street Journal reported on Thursday that IBM was in the final stages of negotiations with Sun, but had reduced its offer from US$10 to US$11.

Shares of Sun Micro have lost 97 percent since peaking at US$260 in 2000.



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