Gadget and Gizmo

Lawyers for IBM are examining Sun Microsystems' contracts and other documents in a due diligence process that could precede an acquisition, the Wall Street Journal reported Friday, citing unnamed sources.

Such work is common before a merger and suggests that acquisition talks between Sun and IBM, which were reported earlier this week but have not been confirmed by the companies, are still under way. Examining the documents could take a number of days, the Journal said.

[ Special report: IBM in talks to Buy Sun | If the merger goes through, watch out, Oracle and SAP | The deal could be good for Java, according to Google. ]

The work being done includes an examination of Sun's software license terms to see if any of them conflict with IBM's business practices, the newspaper reported. Sun offers most of its software, including its Solaris OS, MySQL database, and Java programming language, under a variety of open source licenses.

News of the supposed merger talks was broken by the Journal overnight on Tuesday, though Sun and IBM have not confirmed nor denied any discussions. IBM would pay between .5 billion and billion to buy the company, the Journal said Friday.

Observers have been puzzling over whether IBM is interested in Sun for its hardware or its software assets. IBM would gain some of Sun's large corporate customers and widen its lead in the enterprise server market, where it was just ahead of Hewlett-Packard last year, according to IDC.

There would also be significant overlap between the companies' product lines, however. Both have a Unix server OS, a RISC chip architecture, at least one enterprise database and a whole line of middleware. Any deal would create uncertainty for customers as to which products IBM would continue to develop and support.

Sun has been struggling to grow its business, particularly lately with the recession. Some of its biggest customers were Wall Street banks that either no longer exist or are in dire straits themselves.

Despite the uncertainty it would create, an acquisition by IBM might be a better outcome for Sun's customers than some of the alternatives, said Dan Olds, principal analyst at Gabriel Consulting Group.

"The economic climate plays against Sun's recovery strategy. I think they have probably made as many cuts as they can without really changing what they do and having to drop something big," he said.

If the reports are accurate and Sun has decided to sell, the decision was probably driven by outside investors, notably Southeastern Asset Management, which increased its stake in Sun to more than 20 percent last year and has been pushing hard for a bigger return on its investment.

"I think those guys are driving the bus at Sun," Olds said. "This isn't a strategic thing or a Jonathan Schwartz thing; it's purely business."

Talk of an acquisition has pushed Sun's share price higher. It closed at .63 on Friday, up from .97 before the discussions were reported. IBM's share price initially slipped on the reports but recovered slightly on Friday, closing at .66.

IBM is in talks to buy Sun, according to The Wall Street Journal, leading analysts and industry observers to weigh in on the pros and cons. Steve Ballmer gave it a thumbs up because anything that distracts IBM from the "business" part of its name is fine by him. Speaking of Ballmer, IE8 came out this week. Apple also gave the world a look-see at its forthcoming iPhone 3.0 software.

1.Report: IBM is in talks to buy Sun Microsystems, Ballmer: IBM-Sun deal could help Microsoft and If IBM and Sun merge, watch out Oracle and SAP: IBM wants to buy Sun Microsystems, according to The Wall Street Journal, and the two are in talks aimed at that goal. Microsoft CEO Steve Ballmer likes the idea, too, saying that his company would take competitive advantage while IBM was occupied with how to incorporate Sun into a merged entity. Such a deal could also alter how Oracle and SAP use Java, analysts said.

[ Special report: IBM looking to buy Sun . ]

2.Microsoft releases IE8, stresses security, Researcher hacks just launched IE8 and Browser showdown: IE8 vs. Firefox: Internet Explorer 8 came out this week, with Microsoft trumpeting it as more secure against malware than Firefox or Chrome. Just before the official launch a German researcher hacked IE8 as part of a contest. Meanwhile, PC World tested IE8 against the latest version of Firefox to see which browser is speedier. We don't want to ruin the conclusion, so if you want to see the result of that test, click the link.

3.Apple unveils the iPhone 3.0 OS : Apple showed off its upcoming iPhone 3.0 software at an event at corporate headquarters in Cupertino, California. Developers expressed cautious optimism about the new OS and it also looks like some of the software features will please business users .

[ Test Center: A guided tour of iPhone 3.0 ]

4. Researchers make wormy Twitter attack: Secure Science researchers posted a new Twitter attack that could spread like a worm via the microblogging site. "You can couple an attack with our code and it would just tear the crap out of Twitter," said Lance James, chief scientist at Secure Science. Twitter users, consider yourselves warned.

5. Search on for Conficker's first victim: University of Michigan researchers, with funding from the U.S. Department of Homeland Security, are on a hunt to determine where the Conficker worm came from. They are trying to determine "patient zero," or the first computer that was infected by the nasty worm.

6. Palm sales plummet as Pre waits in the wings: Palm joined the club of companies that had a rough quarter, with its smartphone revenue plunging 72 percent, with smartphone sales down 42 percent. The rest of the dismal news awaits you at the link if you care to read on. For those who are full up on woeful financial news, read on for a breath of fresher air …

7. Wall Street Beat: M&A, Oracle stress the positive: Investors were in a better mood for much of the week (although by Friday they seemed to have returned to being panicky and uncertain). But several consecutive days of more upbeat market reactions and a trickle of related positive news from IT vendors did us all a lot of good, because at this point, we will take all of the relatively optimistic economic news we can get, however short-lived it winds up being.

8. TomTom sues Microsoft for patent infringement: We can just hear TomTom saying to Microsoft, "Ha! Ha! Take that!" The GPS device maker sued Microsoft for patent infringement related to four patents in Microsoft Streets and Trips mapping software. Microsoft, you might recall, filed a lawsuit against TomTom last month, accusing the company of infringing eight patents, one of which involves the Linux OS that TomTom uses.

9. Bracing for NCAA tournament traffic: Well, you didn't really think that this week's Top 10 would fail to include a nod to "March Madness," the annual playoff rite of early spring for college basketball fanatics, did you?

10. Flying car takes to the skies and roads: This entry falls under the "too cool to not include" category. Terrafugia showed off its flying car this week. Eat your heart out, George Jetson.