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The potential merger of International Business Machines Corp. (IBM) and Sun Microsystems Inc. (JAVA) may force Dell Inc. (DELL) to do some buying of its own.

Earlier in the week, The Wall Street Journal reported IBM was in talks to buy Sun, a move that would create a behemoth selling the servers behind corporate data centers. The deal potentially disrupts Dell's server business, which delivered about 10% of the January quarter's $13 billion in revenue.

Already, speculation Dell could be on the prowl pushed share prices of potential targets higher. On Friday, shares of smartphone-maker Palm Inc. (PALM) added 2.3% to reach $7.89 after Kaufman Bros. analyst Shaw Wu suggested the company would Dell enter the smartphone market, an area Dell is widely believed to be targeting.

Dell's certainly in position to deal. The Round Rock, Texas, company has $9.1 billion in cash and short-term investments as of late January, and ample credit supply. It also suspended buying back stock, leaving more money to play with.

A Dell spokesman declined to comment on the speculation.

But Chief Financial Officer Brian Gladden recently hinted the company is in the market for an acquisition.

"We will be opportunistic," Gladden said at a recent appearance. "We'll watch pricing, the broader market trends and see what makes sense out there."

In addition to the pressure an IBM-Sun deal could put on Dell, the company needs to deal with an overall slowdown in business. In its fiscal fourth quarter, revenue fell 16%, net income dropped 48%, and nearly all of Dell's business lines saw revenue declines.

"They definitely need to do something," Kaufman's Wu said.

Should an IBM-Sun happen, Dell will likely need to beef up its server business, an industry where market share is critical because machines are inexpensive and margins are razor thin. Companies in it remain profitable by adding lots of costumers, something that could be achieved by acquiring another company with a presence in the market.

Dell's services and software businesses could also use some heft. Analysts have suggested the company might look at technology consultants or outsourcers like Computer Sciences Corp. (CSC) and Accenture Ltd. (ACN), or software makers like Red Hat Inc. (RHT) and BMC Software Inc. (BMC). Dell may be able to benefit in both areas, which are expected to grow as businesses turn to outsourcing or Internet-based "cloud" computing in an effort to cut costs.

Handset makers might also fit into Dell's plans. Several analysts, including Kaufman's Wu, think Dell has been working on a new device in order to jump into the market. Both Research In Motion Ltd. (RIMM) and Palm have been battered by the market downturn, making them historically inexpensive.

- By Ben Charny; Dow Jones Newswires; 415-765-8230; ben.charny@dowjones.com