IBM has failed to reach an agreement to buy Sun Microsystems, despite reports last week that a deal was expected...
Sun's high-end hardware business has struggled due to the economic crisis and last month the company announced 1,500 jobs cuts as part of its plans to slash costs.
IBM and Sun have been in merger talks for several weeks over a deal, which last week was valued at $9.55 a share.
After a legal review of potential problem, such as Sun's contracts with employees and IBM competitors, IBM is said to have reduced the offer to $9.40 at the weekend.
IBM withdrew the offer after Sun's board is said to have balked at the deal and insisted on certain guarantees that sources close to the talks said IBM considered onerous.
It is not clear whether the collapse in talks is permanent or temporary, but it could open the way for Sun to look for other buyers, although analysts say this may prove to be difficult.
If the deal went ahead, it would enable IBM to become the dominant supplier of Unix servers and strengthen its position against rivals Hewlett-Packard and Oracle in the database software sector.