Sun Microsystems Inc. would be willing to resume takeover talks with International Business Machines Corp. if IBM makes a stronger commitment to close the acquisition, two people familiar with the matter said.

The companies are locked in a stalemate after acquisition talks dissolved almost two weeks ago, said the people, who declined to be identified because the information is confidential. There are currently no discussions and each company is waiting for the other to make a move, the people said.

IBM, the world’s largest computer-services company, withdrew an offer valued at about $7 billion after Sun broke off exclusive negotiations on April 4. Sun balked because there were no guarantees that IBM would stick with the takeover if the companies encountered barriers such as an antitrust review, a person familiar with the matter said last week.

Sun Chief Executive Officer Jonathan Schwartz was in favor of a deal, although he ultimately voted with the rest of Sun’s board to reject the offer because the price was too low and there was little certainty that the merger would close, that person said.

A purchase would help IBM CEO Sam Palmisano bolster the company’s server business. With Sun, IBM would control almost half of the server industry, whose sales declined 14 percent to $13.5 billion in the fourth quarter, according to researcher IDC.

Shawn Dainas, a spokesman at Santa Clara, California-based Sun, declined to comment. IBM’s Edward Barbini also refused to comment.

Shares Drop

Sun has lost about 28 percent of its value since the talks broke down. The stock dropped 10 cents to $6.13 today in Nasdaq Stock Market trading. Shares of Armonk, New York-based IBM fell 42 cents to $98.85 on the New York Stock Exchange.

A government antitrust investigation would hinge on how broadly regulators define the server market, said Greg Neppl, an attorney at Foley & Lardner LLP in Washington. If the probe focuses specifically on servers with Unix software, there will be a higher level of scrutiny, he said.

IBM is the leader in the Unix server market, with 36 percent of revenue in the fourth quarter, according to research firm Gartner Inc. Sun ranked third, behind Hewlett-Packard Co., with 28 percent.

Sun may have difficulty finding another bidder. Cisco Systems Inc. CEO John Chambers indicated today in Seoul that his company isn’t likely to bid for Sun. If Cisco was going to make an acquisition in that area, it “would probably have already moved,” he said.

Hewlett-Packard, which had held talks with Sun last year, doesn’t plan to resume negotiations, a person familiar with the matter said on April 6.

Source:Bloomberg