International Business Machines Corp. and Sun Microsystems Inc. are negotiating a takeover that values Sun at $9 to $10 a share, people familiar with the matter said.

The discussions are continuing and no agreement has been reached yet, said one of the people, who asked not to be named because the talks are private. The companies are going through contracts for the merger, the person said.

Sun shares, which jumped 79 percent on March 18, the day the deal was first reported, have since fallen 7.6 percent. The merger would give Armonk, NY-based IBM almost half the server-computer market. Sales of servers declined 14 percent industrywide in the fourth quarter as corporations cut costs in the recession.

Sun, based in Santa Clara, Calif., rose 21 cents, or 2.6 percent, to $8.21 in Nasdaq trading yesterday. IBM advanced $3.21, or 3.3 percent, to $100.82 in New York Stock Exchange composite trading.