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IBM scrutinising Sun contracts, says report

Dawn Kawamoto CNET News

Published: 23 Mar 2009 08:31 GMT

IBM is reportedly wading through Sun's contracts and documents for potential conflicts or problems, as it works its way through the due diligence process toward a merger, according to a report on Friday in The Wall Street Journal.

IBM's attorneys have been poring over Sun's documents for at least the past few days, if not longer, according to the Journal.

And while the due diligence process is not anticipated to lead to any nixing of a deal, IBM is seeking a clear understanding of where Sun stands with its complex cross-licensing agreements and other contracts, according to sources cited by the Journal.

In addition to Sun's contracts, IBM may also be taking a peek at Sun's fiscal third-quarter data, given the company will be closing its quarterly financial books at the end of the month.

When Sun reported its fiscal second-quarter results in January, it posted an 11 percent year-over-year drop in revenue. But on a sequential basis, its financial performance was less severe.

As the parties work toward a merger, IBM is reportedly considering a buyout price of $6.5bn (£4.5bn) to $8bn, according to the Journal.

Sun closed down about six percent to $8.10 a share during regular trading Friday. But in after-market trading, its shares rose nearly two percent to $8.24 a share.

Credit: Report: IBM combs through Sun contracts from CNET News