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Sun shares settle back, after premarket pop

Sun shares jump more than 10 percent, following reports of interest in resuming IBM merger talks. But as regular trading resumes, shares show a more moderate uptick.

Update at 7:25 a.m. PDT: Updated stock information added and headline updated.

Sun Microsystems shares soared more than 10 percent in premarket trading on Thursday, following a Bloomberg report that the struggling hardware maker was interested in resuming merger talks with IBM.

Sun climbed nearly 10.8 percent to $6.79 a share in premarket trading. But as the markets opened for regular trading, Sun's shares settled back to a more modest uptick of 2.77 percent to $6.30 a share. The broader markets were mixed.

Either way, its stock remains a ways off from the $9.27 it reached when reports first surfaced it was in buyout talks with IBM.

Sun is reportedly expressing interest in resuming talks with IBM, if Big Blue will raise assurances that it can and will close the deal, according to Bloomberg.

Antitrust experts have previously noted that a Sun and IBM merger would likely face intense scrutiny by U.S. and European regulators.

IBM holds nearly 32 percent of the worldwide server market, based on 2008 factory revenue, and Sun has a 10.1 percent share, according to IDC. Combined, the two companies would account for nearly 42.1 percent of the overall $53.3 billion server market.

And if U.S. antitrust regulators, for example, express concerns over a deal, it could take six months to a year before they issue a final decision on whether to block a merger or let it go through, noted one antitrust attorney.

When companies are concerned their merger may ultimately face a tough time reaching closure, it's often reflected in a higher break-fee, noted the antitrust attorney.

"The price that a party demands for a break-up fee is known to kill deals," the attorney said.

That's because break-up fees can reach hundreds of millions of dollars.

Such was the case for prospective buyer EchoStar Communications back in 2002. The satellite TV company paid nearly a 2.5 percent break-up fee, or $600 million, to Hughes Electronics, after federal antitrust regulators said they would block the $25.6 billion merger.