What Would IBM Get From Buying Sun?11:34 AM EST Wed. Mar. 18, 2009
An acquisition of Sun Microsystems by IBM, should one happen, would give IBM some of the industry's top hardware and software technology and strengthen its open-source offerings.
IBM is in talks to acquire Sun for $6.5 billion, according to a report in Wednesday's The Wall Street Journal.
While Sun's main strength in the past was its SPARC-based servers, its server revenue has suffered as the appetite for its larger servers has waned.
However, Sun has one of the fastest-growing x86-based server businesses in terms of unit sales. Its x86-based server line includes models with up to 32 cores, as well as a line of 2U rack-mount servers with up to four quad-core processors. An acquisition of Sun by IBM would make IBM more competitive in that market against Hewlett-Packard and Dell.
Sun's SPARC-based servers also have done well at the entry level.
In addition, Sun has a full line of blade server products that could help IBM increase its competitiveness against blade leader HP, which currently has more than 50 percent of that market. IBM, however, could consider weeding out Sun's blade business in favor of its own blades, which control more than 30 percent of the market.
And while Sun's legacy big iron business has been falling, an acquisition would give IBM a new maintenance revenue stream in the short term and a chance to replace those servers with its own line of System p midrange servers and System z mainframes later.
Sun's storage business traditionally has been the weakest part of its hardware business, despite its acquisition of StorageTek a few years ago. However, in the past couple of years that has changed as Sun has become a leader in combining its server and storage technologies into hybrid products.
Sun's storage technology could help IBM grow its storage business, which fell 20 percent year over year, according to its fourth-quarter 2008 financial report.
IBM currently depends on storage manufactured by others, including NetApp and LSI, and an acquisition would give it a fast-growing storage line based on homegrown technology.
Sun in November introduced its new Storage 7000 Unified Storage Systems, also known as Amber Road. Amber Road, which is a series of hybrid server/storage devices, pools all hard drives and solid state drives (SSD) in a new type of RAID configuration that allows quick addition of new drives and fast RAID rebuilds.
Channel sources say that it has become a fast-growing product.
Sun also has taken the lead in SSD technology, melding it to its Open Storage initiative, introduced in June, which calls for the increased use of industry-standard components to enable customers to quickly expand storage capacity at a low cost.
Sun said earlier this month that it plans to make SSD and flash memory the heart of its storage and server initiatives going forward, putting it ahead of all the top storage vendors in this area.
IBM would get Sun's virtualization business, including a Xen-based server virtualization technology and a virtual PC technology along with a line of thin clients to make it work. The virtual desktop PC business is still relatively new, but is expected by analysts and the channel to eventually exceed the server virtualization market, given the larger number of PCs in use by businesses.
Sun also would bring several key software technologies.
The first is Sun's Solaris operating system. While Solaris competes with IBM's AIX, Sun has been making steady market inroads by providing Solaris as a free download and via several OEM deals, including one earlier this month with HP.
Along with Solaris, Sun would bring a wide range of other software, including a full line of security offerings. Sun also developed Java, and still heads development of the technology.
In addition, Sun is strongly committed to open source. It has shown that commitment with acquisitions of companies that produced StarOffice, based on the Open Office platform, and the MySQL database application. MySQL, the world's most popular open-source database product, would likely be of special interest to IBM, which also has its own database offering and is looking for ways to compete against Oracle and Microsoft in this market.
Now for cloud computing. Sun on Wednesday unveiled an initiative aimed at helping customers easily work with Sun's compute and storage services with virtual resources and open APIs. An acquisition could give IBM a leg up in the cloud computing race.
While Sun has recently seen an uptick in revenue, the company is trying to stem losses with a series of restructurings. Sources in the channel have complained for years that the company has too many employees, but Sun's traditional response has been to make small, occasional reductions in force. The company has been more aggressive lately and said in November that it plans to lay off about 18 percent of its workforce, or about 6,000 people.
Some of those sources also have said recently that another large round of layoffs is expected this month or next.
Sun's relationship with the channel has seen its ups and downs, but the company for the most part has been a channel-friendly vendor. The company's partners are expecting Sun's personnel reductions to increase its dependence on the channel.