So, probably as I was posting my little blog piece yesterday on IBM taking over Sun, it seems that the IBM and Sun deal was falling apart – seemingly a quabble over the pricing, but I suspect a little more must have been to it than that.

Again, I’m reminded somewhat of Microsoft – when Yahoo! refused their take-over offer, which at $31 represented an extremely generous premium over their then ticker-price of about 62%, with a total deal worth $44.6 billions. Such a rich deal that even Microsoft would have been forced into debt (though doubtless they’re thanking themselves for walking away now – the timing would have been awful). When we look today, it’s around $13 and has been as low as $9. Shareholders were rightly steaming.

At $9.50 for JAVA stock, IBM would have been paying an almost 90% premium over the sub-$5 price pre-takeover talks. What’s going to happen to Sun in trading today? I suspect the market will punish them, hard – they appear to be the ones walking away from the deal, not IBM, and people will be well aware of that before trading starts later. They’re now going to talk to HP and Cisco about a merger – I’m not sure either of those deals makes sense, particularly Cisco, but HP haven’t long ago swallowed Compaq and are still making sense of that.

In many ways this is Sun all over, but the management will have a lot of explaining to do at this point if another deal doesn’t come together quite quickly. If it falls apart and the stock value starts sinking, we may see IBM come back in a bit later and pick them up even more cheaply…