Sun Microsystems VAR Lumenate has acquired the Sun business of crosstown peer Stonebridge, a move that continues the gradual consolidation of the Sun solution provider channel.
The acquisition helps Lumenate, a Dallas-based storage and business-continuity technology provider, solidify its Sun business in Oklahoma and northern/central Texas and gives Stonebridge new financial resources to expand its consulting business. Financial terms of the agreement weren't disclosed.
The deal between Lumenate and Stonebridge is the second Sun VAR acquisition in Texas this year. In March, San Antonio-based Sigma Solutions acquired SIS Technologies, Houston.
Under the agreement with Stonebridge, finalized last week, Lumenate also gets the part of Stonebridge's Hitachi Data Systems and legacy Veritas businesses related to Sun infrastructure.
As a result, Lumenate, which had revenue of $11 million and 17 employees last year, gets 14 new employees plus new business worth more than $20 million. Lumenate founder and president Reagan Dixon said he expects sales for next year to top $40 million as a result of organic growth and the acquisition. To aid that growth, Lumenate aims to hire three technicians to support its combined sales staff.
Dixon said Lumenate has enjoyed strong growth since its launch about three years ago, signing up an average of one new customer per month. But since January, Lumenate already has landed 14 new customers. The growth came primarily from Sun customers that used storage from other vendors, especially EMC, as well as from companies that hadn't used Sun products in the past, he said.
Such strong growth spurred Dixon to consider an acquisition. That opportunity came about a year ago when Stonebridge, a long-time Sun solution provider, signed up as an IBM business partner. Dixon said he called James Ivy, Stonebridge president and CEO, at that time and discussed a deal for Stonebridge's Sun business, but Ivy said no. Yet about three months ago, they got together again, and this time, the time was right.
Part of the acquisition deal includes an agreement for Lumenate and Stonebridge to help each other identify new opportunities. "Neither of us is looking to take advantage of the other," Dixon said. "We want both organizations to be healthy today and in the future. It's structured so that if we come to a customer who, for whatever reason, says they have an allergic reaction to Sun but an interest in IBM, I'll call James [Ivy] to tell him the about the opportunity. But there's no financial arrangement in this regard."
By selling its Sun-centric business to Lumenate, Stonebridge can better focus on the core consulting business it has cultivated since its rebirth in recent years as a traditional solution provider, which followed a failed e-business foray.
"I know it's an overused cliche, but it's a win-win situation," Ivy said of the deal with Lumenate. "This is as close as one can get to it."
About 75 percent of the customers moving from Stonebridge to Lumenate were Sun-only clients, and the rest worked with Stonebridge on both the consulting side and the Sun side, Ivy said.
"The customers we served that were predominantly Sun-centric have the opportunity to be better-served with Lumenate," Ivy said. "We will continue to do business with the others as we have in the past with our consulting business."
Sun customers typically are larger companies, whereas Stonebridge's consulting business is geared more toward midsize firms, according to Ivy. "Sixty percent of our consulting business is in the midmarket," he said. "But Sun's average customer is a larger, multibillion-dollar company. Our strategic value was not getting the leverage we would have hoped for. Also, being in Texas and Oklahoma, we derive much of our consulting revenue from the energy space. That's not where Sun derives much of its business from."
The divestiture of its Sun business leaves Stonebridge with 90 to 100 employees and revenue of about $18 million, Ivy said. Although Stonebridge's Sun business was profitable, the solution provider should do better with its sharpened consulting focus, he added.
"Hopefully, both companies can look back a year from now and say this [deal] is a key enabler of our growth," Ivy said.