Hewlett-Packard Co., which held merger talks with Sun last year, has no plans to return to the negotiating table, according to a person familiar with the situation. Cisco Systems Inc. and Dell Inc., also mentioned as possible acquirers, are unlikely to bid, said Bill Kreher, an analyst at Edward Jones & Co.

“Others have already passed over Sun — given that, were unsure who would step up to the plate,” Kreher, who is based in St. Louis, said in an interview. “We are unsure if the company can execute a successful turnaround on its own. Their future is very uncertain.”

Chief Executive Officer Jonathan Schwartz, a leading advocate for selling Sun to IBM, according to people close to the deal, has been struggling to maintain earnings. Sun is being pummeled by the recession as customers cut back purchases of computer servers used to run Web sites and networks. Suns sales have slowed for four straight quarters.

Schwartz and Suns board, including co-founder Scott McNealy, met at the companys offices in Menlo Park, California, as negotiations proceeded between Sun and IBMs law firm, Cravath, Swaine & Moore LLP, people familiar with the matter said. Sun was being advised by Credit Suisse Group AG and the law firm Wilson, Sonsini, Goodrich & Rosati.

Schwartzs Dismay

Leaks of the negotiations fed media reports over the past three weeks. At one point, Schwartz, 43, expressed his dismay over terms of the deal and the inability of the negotiating teams to keep the talks private, according one person familiar with the matter.

Shawn Dainas, a spokesman for Santa Clara, California-based Sun, declined to comment, as did Christina Schneider, a spokeswoman for Palo Alto, California-based Hewlett-Packard. David Frink, a spokesman for Round Rock, Texas-based Dell, and Terry Alberstein, a Cisco spokesman, also declined to comment.

In a statement yesterday, Sun said it is “committed to its leadership team, growth strategy and building value for its shareholders.”

Sun fell $1.93, or 23 percent, to $6.56 yesterday on the Nasdaq Stock Market. IBM, based in Armonk, New York, lost 66 cents to $101.56 on the New York Stock Exchange.

The failure of the deal may scare away customers at a time when Sun is already challenged for sales, said Toni Sacconaghi, an analyst with Sanford C. Bernstein & Co. in New York. Worldwide demand for servers, which make up almost half of Suns sales, fell 14 percent in the fourth quarter, the most since the aftermath of the dot-com bust, according to research firm IDC.

Customer Uncertainty

IBM was offering $9.10 or $9.40 a share for Sun, according to two differing accounts of the negotiations. Thats almost double the $4.97 Suns shares were trading at on March 17, the day before reports of the negotiations surfaced.

Buying Sun would enable IBM to extend its lead in the server market over No. 2 ranked Hewlett-Packard. Dell is third in the market and Sun is fourth.

Bidding for Sun may not make sense for Hewlett-Packard because the company is digesting the $13.9 billion acquisition of Electronic Data Systems, said Michael Shinnick of Wasatch Advisors Inc. in South Bend, Indiana.

Dell, Cisco

Dell, struggling to resuscitate sales and profit during the worst market for personal computers in six years, may find an acquisition of Sun too expensive and the combination process too complex, Sacconaghi said.

Sun also wouldnt fit well with Cisco, the worlds largest maker of networking equipment, said Mark Sue, an analyst with RBC Capital Markets in New York.

“What Cisco doesnt do well and is less inclined to do is fix neglected companies,” Sue said. “Its unlikely Cisco will have the stomach to take on such an undertaking.”

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