IBM'S buyout of Sun is just good sense: analysts

By Jim Finkle - Analysis

BOSTON (Reuters) - For IBM, buying Sun Microsystems Inc makes a lot of good business sense: It removes a competitor, strengthens IBM against rival Hewlett-Packard and picks up on the cheap the intellectual property of one of Silicon Valley's most respected companies.

While it may be tough to persuade regulators on both sides of the Atlantic to approve the deal, and melding easy-going Sun with more conservative Big Blue will be a challenge, many analysts believe IBM has a good chance of doing just that.

"This is a very difficult environment in which to gain market share. That's probably an easier way than putting more sales people on the ground," said Pat Becker Jr, chief investment officer for Becker Capital, which manages about $1.6 billion and holds a small number of shares in IBM.

Kaufman Brothers analyst Shaw Wu said IBM (IBM.N) and HP (HPQ.N) have been trying to woo customers away from Sun (JAVA.O) for years.

"Sun's installed base is pretty good. While it is shrinking, it is fairly loyal. And what better way to get to that customer base than just buying the company," he said.

And then there's International Business Machines Corp's track record. It has spent some $25 billion since 2003 to buy 80 companies, with only a few hiccups along the way.

IBM offered to purchase Sun -- whose market value tops $6 billion -- for $9.55 per share after a thorough vetting, a person familiar with the situation said on Thursday. That source, who is not authorized to discuss the matter publicly, said a final agreement could be announced within days. Both companies have declined comment.

The deal would add what was one of the world's hottest brands during the dot.com technology boom to IBM's arsenal of computer services, hardware and software products.