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FusionStorm, Sun Microsystems' largest West Coast solution provider and one of the largest U.S. VARs, has acquired Jeskell, IBM's biggest government solution provider, creating a $400 million channel powerhouse.
Under the deal, terms of which were not revealed, Jeskell becomes a subsidiary of San Francisco-based FusionStorm. Javed Kahn, president and CEO of Jeskell, will continue to run Jeskell as president.
The Jeskell acquisition is the latest and largest in a string of acquisitions by FusionStorm, and FusionStorm CEO John Varel said that activity will continue over the next few months.
Both companies have enjoyed strong growth over the past few years and are profitable, Varel and Kahn said.
Key to the future success of the Jeskell acquisition will be keeping the two entities separate, which shouldn't be difficult because the two companies have served different markets, according to Varel.
FusionStorm is focused almost exclusively on the commercial space and has no government business. Almost all of its business is related to the Sun platform, with just a small amount of business coming from IBM pSeries server sales, Varel said. With the Jeskell deal, FusionStorm purposely didn't look to buy an IBM solution provider in the commercial space, which would have conflicted with its Sun business, he noted.
"We don't want to do anything to damage our Sun business," Varel said.
FusionStorm also is one of the nation's biggest Cisco Systems solution providers and is one of the 50 to 60 Cisco Gold-certified partners, Varel said. Of FusionStorm's $230 million in annual revenue, about $110 million comes from Sun business and $70 million comes from Cisco business, with less than 1 percent coming from IBM, Varel said.
Jeskell, on the other hand, got all of its fiscal year 2006 revenue of $132 million from sales of IBM products and services to the government and education markets, according to Kahn.
Keeping the FusionStorm and Jeskell businesses separate reduces the risk of a key problem associated with failed acquisitions, Varel said.
"After doing several acquisitions and after consulting with friends that have done acquisitions, I found the No. 1 reason an acquisition fails is that the first company pushes its culture on the second company," he said. "I, in no way, will do this. There will be no cross-selling between the two entities."
As a result, the FusionStorm business won't pursue government opportunities and the Jeskell subsidiary will stay out of the commercial space, Varel noted. FusionStorm also will transfer its small IBM business to Jeskell, he added.
A big part of the acquisition, though, is related to Cisco. Jeskell has no Cisco business but has been looking to bring Cisco into its IBM government accounts, Kahn said. As part of FusionStorm, Jeskell will get the Cisco access it couldn't attain in the past because it waited too long to get certified, he said.
"Like anything in life, when you start late, you get chopped by the big guys," Kahn said. "We didn't have leverage like the big guys."
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