We’re going out on a limb and saying, “Probably”; we believe there’s a better than 50% chance that some sort of deal will be cut between IBM and Sun. According to published reports, HP, Dell, and Fujitsu have all turned down the opportunity; IBM is the last – and probably best – option. It’s important to realize that Wall Street firms (Southeastern Asset Management and KKR) are by far the largest shareholders, so they’re driving the bus. Southeastern Asset Management owns roughly 23% of Sun, while KKR has a bunch of worthless warrants. Both companies have seats on Sun’s board of directors. Sun management and insiders own almost no stock, which makes them spectators in this deal. Both Southeastern Asset Management and KKR are deeply underwater on their Sun investments and want to recover their money. Both also realize that the current economy will make this very difficult, if not impossible, in the short term. The money that is being bandied around ($6.5 billion or more) is probably more than enough to satisfy these guys. The average cost per share for SAM is somewhere around $6 per share, and this transaction would give them a nice profit on their investment. It’s important to understand the mentality behind these players and this type of deal – it’s all about the transaction. They are all about getting their money back. Hopefully there’ll be a profit along the way, but probably they’re more than happy just to recover whatever they can. They don’t particularly give a crap about the company or the industry – they’re all about the deal. But they aren’t dumb; they know that a failed deal would tarnish Sun to a point where it will be much less valuable… so I would expect that they will pursue any possible deal very aggressively and ensure that something happens. Assuming that the Wall Street Journal is correct on the numbers, I’m a bit surprised that IBM has put such a generous offer on the table. A 100% premium is a valuation that the current Sun business results simply can’t support – even before the global economic meltdown. With this bid, IBM is signaling, in my mind, that they want this deal to happen more than they want to ensure that they are getting the best deal possible.