The agreement, which was discussed during a meeting this week between Sun Chief Executive Officer Scott McNealy and Fujitsu Chairman and Representative Director Naoyuki Akikusa, is expected to be finalized within the year, the report said.

The two men did meet Wednesday, Sun spokesperson Kasey Holman confirmed, but she would not comment on whether Nikkei‘s story was accurate. The paper did not identify the source of its information.

“Sun and Fujitsu have been partners for many years, and as a part of our ongoing relationship we are always exploring ways to improve or expand the business for the benefit of both companies,” Holman said.

Sun would continue to produce its low-end servers, but machines priced above US$370,000 would be manufactured by Fujitsu IT Products Ltd., according to the report.

Fujitsu and Sun have a long-standing collaboration on the Scalable Processor Architecture (SPARC) microchip architecture, which forms the basis of Sun’s UltraSparc processors and Fujitsu’s Sparc64 chips.

At present, both companies design their own individual microprocessors, and Sun’s chips are manufactured by Texas Instruments Inc.

Under the new agreement, the two companies would jointly develop processors, which would be manufactured at a Fujitsu subsidiary, the report said.

Representatives from Fujitsu did not respond to calls seeking comment for this story.