This is being reported in several places, but I like the Wired version which you can find here
The merger of IBM and Sun Microsystems appears to be coming apart, according to several reports, after a chain of events over the weekend which saw Big Blue reduce its $7 billion offer, the Sun board reject IBM’s formal takeover proposal and IBM then withdraw the bid completely.
Evidently Scott McNealy jumped in and voiced his opposition, despite the current CEO’s support of the deal. But it might not really be over
The New York Times also reports that this deal is toast — but that another deal may rise from the ashes:
Whether the I.B.M. decision amounts to a negotiating tactic to get agreement on the final sticking points is unclear. Though the offer is off the table for now, the two sides could resume bargaining if Sun’s share price drops from its $8.49 close on Friday and major investors pressure the company to come to an agreement.
The article also posits that Sun may not have many other options
It isn’t clear what Sun’s options absent IBM interest would be; Sun shares rallied last month to match the 100% premium Big Blue’s offer implied — and dropped about 24% on the open Monday. No other suitor is knows to exist for the once-iconic Silicon Valley company. And, having put itself in play, customers may be skittish about its prospects and commitment if the merger doesn’t go through.
But I’m hearing today (and in comments on this article) that Google may be in the hunt. Unlike IBM, Google might actually like Sun’s software position, though it probably won’t have much use for the hardware.