Sun Shines On IBM; Dell's Genius Bar

Printer-friendly version Email this CRN article

Despite the hardship befallen many high-tech companies during this recession, IBM executives have maintained a swagger. That's not to say that Sam Palmisano's troops aren't running scared, but their consistent message is they have the cash ($12.9 billion) along with a diverse enough business model to weather the storm and, with a little luck, will come out of the downturn stronger.

IBM, of course, does face challenges. Strengthening its sales into the midmarket and focusing on sales less than $100,000 are two areas the company needs to address quickly—mostly from a partner perspective. I am not sure if purchasing Sun can help IBM on those fronts, but it certainly took advantage of the downturn to pick off a ompetitor—albeit one that is a shell of its former self.

Neither IBM nor Sun are commenting on reports the two are talking to consolidate their Java efforts or server platforms, but comments from Intel CEO Paul Otellini disclosed in an SEC filing confirmed Sun has been seeking suitors lately, with IBM as the lead candidate. Face it, with a market cap of about $6 billion compared with IBM's $131 billion, and Sun churning out around $13 billion in sales annually with $2.6 billion in cash, the company looks attractive. Now the lawyers and bean counters get to crunch the numbers.

From a channel perspective, there remain a few loyal Sun VARs along with the dedicated sales organizations within two distributors. But Sun never really cracked the channel code and remains an also-ran in the big leagues of partner programs. If IBM does decide to absorb Sun, its first order of business should be to find a way to expand the channel reach for Sun's hardware and software. The irony here is that just a few weeks ago headhunters were scouring the channel looking for candidates interested in managing Sun's worldwide partner organization. No one was biting. Many privately confessed they did not want the Sun job on their resume. You can admire Scott McNealy for many things, but, ultimately, Sun's downfall rests on his shoulders because he fundamentally never understood the power of the channel.

IT IS INTERESTING THAT WE ARE writing about Sun's last chapter while Dell is trying to re-create itself as a channel-friendly—I won't say "centric"—company. Its I-cannot-believe-this-happened deals with Tech Data and Ingram Micro are a defining moment with broad implications for its competitors. Worldwide channel chief Greg Davis' progress is to be admired, yet there are still many VARs who see direct-sales conflict.

Make no mistake—the deal is intended to save Dell millions as it essentially outsources channel sales and support to those distributors. There is certainly no better reason to do it than that. But in partnering with the Big Two, Dell effectively puts the squeeze on a wide range of competitors that have for many years relied heavily on distribution, experts say. Let's take the likes of HP and Lenovo out of the conversation and focus instead on Acer. Acer has gained share and momentum the past few years by relying on distributors to build its brand in the market, and it has had an arm's-length relationship with VARs. Without strong relationships with partners or an intimate understanding of its sales channel, it could be the victim of Dell's distribution moves. Unless, of course, companies like Acer, Toshiba and a bevy of peripheral companies respond with direct channel programs. HP or Lenovo partners say they will be hard-pressed to sell a Dell product because the goods are available through distribution. But the same is not true for many other brands, and that is the genius behind the Dell move.

BackTalk: Should IBM buy Sun? Like Dell's distie play? Contact Senior Vice President/Editorial Director Robert C. DeMarzo at

Printer-friendly version Email this CRN article