IBM is to buy Sun?

International Business Machines Corp. is in talks to buy Sun Microsystems Inc., people familiar with the matter said, a combination that would bolster IBM's heft on the Internet, in software and in finance and telecommunications markets.

The two companies have a common interest in that both make computer systems for corporate customers that aren't reliant on Microsoft Corp.'s Windows software, and their product lines are less dependant than rivals' on Intel Corp.'s microprocessor technologies. The two companies are also strong supporters of open-source Linux and Java software.

If the deal does go through, which could happen as early as this week, IBM is likely to pay at least $6.5 billion in cash to acquire Sun, the people said. That would translate into a premium of more than 100% over Sun's closing price Tuesday.

But there are problems with such a deal. One is that Sun wouldn't provide much that IBM wants, apart from turnover. IBM has been reducing its reliance on hardware, getting rid of its PC, storage and printer businesses. Buying Sun would get it another processor and an incompatible hardware business.

Another problem is that while Sun used to have some valuable software -- including the Solaris version of Unix and Java -- it has been making this open source. IBM, the original Evil Empire, is still a huge supplier of proprietary software, especially in the mainframe business it still dominates. IBM only likes open source in so far as it can make money from it (see IBM likes Open Source when it suits them, not when it costs) and invests in its own version of Unix (AIX). It doesn't have a Linux distro, and it might not be keen on getting personally involved with shipping GPL software.

If IBM wanted to buy Sun it would have done so years ago, at least on the merits of synergy and technology. If IBM wanted to buy Sun simply to trash the company, plunder the spoils and do it on the cheap — the time for that was last fall.

So more likely, given that Sun has reportedly been shopping itself around (nice severance packages for the top brass, no doubt), is that Sun has been too successful at selling itself — just to the wrong party at too low of a price. This may even be in the form of a chop shop takeover. The only thing holding up a hostile takeover of Sun to sell for spare parts over the past six months was the credit crunch, and the fact that private equity firms have had some distractions.