IBM and Sun Microsystems Get Closer to Merger

Layoffs inevitable if companies merge

It has been rumored for weeks that IBM is considering buying Silicon Valley computing pioneer Sun Microsystems. Those rumors appear to be valid. Forbes magazine reports that the companies are inching ever closer to joining forces. Forbes also reports that said merger could result in 10,000 layoffs.

Asking price

Sun Microsystems is apparently seeking almost $7 billion for its business, a sum that Big Blue could probably find it its couch cushions. At that price, IBM won’t need short term loans to make the purchase. IT industry watchers say that because of the overlap between the two companies’ operations, as much as a third of the Sun staff could be shown the door.

“This deal is definitely going to lead to a lot of combined layoffs. And it wouldn’t be a surprise if most of that bloodletting happened on the Sun side,” said Forrester Research analyst James Staten.

Just last week IBM cut 5,000 U.S. jobs.

Quantity over quality?

Sun has long been known for its innovative technology. However, according to Forbes, IBM’s main motivation for this purchase is Sun’s customers, not its intellectual property.

Peter Falvey, a mergers and acquisition banker with Revolution Partners, says that IBM can easily profit from this deal simply by buying Sun and then eliminating overlap. The companies compete in many of the same markets for servers, storage and software.