Subba’s Serendipitous moments

March 19, 2009

Does IBM need Sun?

Filed under: Business,Competition — Subbaraman Iyer @ 8:49 pm
Tags: , , , , ,

No sooner had I finished posting my blog post on Cisco’s Unified Computing strategy and its implications, I saw that IBM is in talks to acquire Sun for $6.5 billion.  Sun has over $2.5 billion in cash, so the entire Sun business is valued at $4 billion.

I had expected a spate of acquisitions to happen, but not so soon. Not IBM acquiring Sun. My take was that it would be either EMC or Dell or HP acquiring Sun.

Here’s my analysis assuming that the news is for real and that it is not one of those rumor balloons:

  1. IBM gets more share in a shrinking UNIX server market. IBM is already doing a good job with Linux (IBM’s overall market server market share is 31%) and doesn’t need the extra 10% market share coming from Sun. I have already said here that with Cisco entering the server space the already low margins could even get lower. So, IBM with a server margin (around 10%) buying Sun for just the servers doesn’t make compelling logic.

  2. Maybe IBM is eyeing Sun’s MySQL database! It makes sense, but IBM has its own DB2 and it also has Informix. So, adding MySQL to their product portfolio makes limited sense.

  3. Java may be the crown jewel in Sun’s assets, but it hasn’t made money for Sun. I wonder how IBM will make it sing.

  4. The rest of Sun’s products –  storage, SOA stack, professional services none of them are compelling enough.

  5. No compelling next generation chip architectures from Sun.

Clearly there’s little strategic fit from a technology standpoint or from a marketing standpoint for IBM to acquire Sun.

Maybe there are some new initiatives from Sun in the cloud computing space. But Sun has not been investing in any kind of cutting edge architecture for a long time.

One possible reason for this rumor balloon to gain credence is that this move could thwart other vendors like HP, Dell or  a Cisco to acquire Sun. It doesn’t make any sense, because they could enter the bidding fray themselves. My own thinking is that a Dell or a Cisco may have a better fit with Sun’s products, channels and even culture.

Some analysts seem to believe that after acquiring Sun, IBM may sell the hardware and license the Solaris business to Fujitsu. This seems too far fetched to me.

Most importantly, Sun doesn’t offer any great networking product or technology — something that IBM needs to counter Cisco’s Unified Computing proposition.

So, I will be surprised if this deal goes through. But in the world of M&A, value perception is entirely different and a lot lies in the eyes of the beholder.

Tags: , , , , , , ,

Powered by Qumana

About these ads

6 Comments »

  1. [...] Does IBM need Sun? [...]

    Pingback by Cisco declares war on IBM and HP « Subba’s Serendipitous moments — March 19, 2009 @ 9:36 pm | Reply

  2. [...] No sooner had I finished posting my blog post on Cisco’s Unified Computing strategy and its implications, I saw that IBM is in talks to acquire Sun for $6.5 billion.  Sun has over $2.5 billion in cash, so the entire Sun business is valued at $4 billion. I had expected a spate of acquisitions to happen, but not so soon. Not IBM acquiring Sun. My take was that it would be either EMC or Dell or HP acquiring Sun. Here’s my analysis assuming that the news is for real and that it is not Read more from the original source: Does IBM need Sun? [...]

    Pingback by Does IBM need Sun? | Real Rumors — March 20, 2009 @ 1:41 am | Reply

  3. What does all this mean to the number three player in the server market? Be aggressive to gain market share?
    Looks like Dell is trying to do exactly that in an intensely competitive environment touting “emphasis on value” through their new line of server & storage products(http://content.dell.com/us/en/corp/d/press-releases/2009-03-25-01-PS6000.aspx). Its new storage devices was built with technology from its $1.4-billion acquisition of EqualLogic Inc. in 2007. During the recent announcement Michael Dell put great stress on “adoption of open standard infrastructure and virtualization technology” to offer attractive solution to cost conscious segment of the market. This may be quite a successful strategy at a time like this when organizations are trying to stay away huge capital expenditure. And I bet Dell too is actively eyeing acquisitions in not only in Storage but also in Services and Data Center space as well to make its overall presence strong in the sector. Any guess who could be its first acquisition this year?

    Comment by Krishna Baidya — March 31, 2009 @ 4:57 pm | Reply

  4. [...] wrote earlier that IBM doesn’t need Sun. It is Sun that needs IBM. Sun has been in the market for a long [...]

    Pingback by IBM — Sun deal fails? « Subba’s Serendipitous moments — April 6, 2009 @ 11:35 am | Reply

  5. [...] after talks between IBM and Sun failed. I had analyzed why the IBM may not really need Sun here and here. IBM had offered $9.40 per share. Oracle’s offer is a 40% premium over Sun’s closing [...]

    Pingback by Oracle acquires Sun -- Unexpected and interesting | Expanding Thought — March 14, 2011 @ 1:43 pm | Reply

  6. [...] wrote earlier that IBM doesn’t need Sun. It is Sun that needs IBM. Sun has been in the market for a long [...]

    Pingback by IBM -- Sun deal fails? | Expanding Thought — March 14, 2011 @ 1:48 pm | Reply


RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

The Rubric Theme. Create a free website or blog at WordPress.com.

Follow

Get every new post delivered to your Inbox.

%d bloggers like this: