Merger talks between IBM and Sun Microsystems were said to have broken down on Sunday, with the two companies unable to agree on the terms of a deal.
Sun's board rejected a formal offer from IBM on Saturday, considering the offer price too low, The Wall Street Journal reported. Sun was also concerned that the offer gave IBM too much leeway to walk away from the deal, according to the newspaper, which cited unnamed sources familiar with the situation.
The two companies are reported to have been in merger talks since at least March 18. The acquisition, valued at about $7bn, would extend IBM's lead at the top of the server market and give it control of Sun's Solaris, Java and other technologies.
But the companies had reportedly been haggling over a price, and on Saturday Sun rejected IBM's offer of $9.40 per share, according to The New York Times, which also said the talks had fallen apart.
Sun had been seeking assurances that IBM would not walk away from the deal even if it faced tough regulatory hurdles, the Times said, and IBM considered the requirement too onerous.
Sun has sent a notice to IBM terminating its right to exclusive negotiations, and IBM in return has withdrawn its offer to buy Sun, the Journal said.
Such brinkmanship isn't uncommon during late-stage negotiations, the paper noted, and the companies may yet resume talks. But for now, the stance between them was described as "confrontational".
IBM has conducted its due diligence of Sun and found nothing that would prevent it from buying the company, the Journal said.