IBM in talks to buy Sun Microsystems?

IBM is rumoured to be offering $6.5bn for Sun Microsystems

IBM is in talks to buy Sun Microsystems, according to an article in The Wall Street Journal citing "people familiar with the matter".

In a move that could dramatically bolster IBM's market share in the server space, the report states that the company could offer nearly double Sun's Tuesday closing share price of $4.97 (£3.58), in a cash deal totalling around $6.5bn (£4.68bn). The price was around $4.70 (£3.39) just prior to the news.

Recent figures from analyst firm IDC suggest that the entire server market has tumbled in recent months. IBM still leads the server space with nearly a third of the market, followed by HP, Dell and Sun. A merger of IBM and Sun would give the combined entity more than 40 per cent of the market.

The deal would be the largest ever by IBM, surpassing its $5bn (£3.6bn) acquisition of business intelligence firm Cognos last year.

Both companies refused to comment on the potential deal, but speculators claim that an official announcement could be made later this week. The deal would be something of a change for IBM, which has been focusing less on hardware and more on software and services in recent years.

Any deal would be very closely scrutinised by regulators to ensure that it would not upset the balance of competition in the enterprise server and services markets.