NYT: IBM is in talks to acquire Sun

Things are shaking up in the server world. Two days after the launch of Cisco’s first servers, the New York Times reports that IBM wants to buy Sun Microsystems for $7 billion.

Nothing is official quite yet—the paper quotes an anonymous source with “knowledge of the negotiations.” If the deal goes through, though, it would combine not just Sun’s and IBM’s meaty server businesses, but also give IBM control over Solaris, Java, and MySQL. Unsurprisingly, the NYT says the move “could prompt an antitrust challenge.”

Judging by recent Gartner numbers, the two companies would have accounted for 17.3% of worldwide server shipments and 43% of global server revenue last quarter.

Sun has reportedly been seeking a buyer since late last year, and company officials have been meeting with “representatives of other technology companies.” The New York Times points out that IBM may seem like an unlikely candidate, since it has been shifting its focus from hardware sales to services in recent years. However, a merger would “bring together two technology companies that have continued to invest heavily in research and development, when many of their corporate peers have cut back to shield profits.”

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    • jabro
    • 11 years ago

    Your question about whether Cisco’s entrance into the server market has prompted IBM’s move to acquire Sun is interesting. IBM’s purchase of Sun (assuming it is real) has got to be about acquiring enterprise customers first and getting valuable software IP second.

    Sun’s dying SPARC business has nothing to offer IBM, whose mainframe and POWER (AIX / System I (AS/400)) businesses are doing just fine on their own. Since POWER 4 was introduced, IBM has been steadily acquiring UNIX market share at Sun’s expense, and there is nothing to indicate that this was going to change in the next few years. Sure, Niagara is interesting, but I’m not sure the latest Niagara systems are any better at high throughput web/app serving than the about to launch Nehalem Xeons. And that is all Niagara is good for, unlike Nehalem. As for Rock, that seems to be a looooong shot. Sun could not bring the in-house developed successors to UltraSparc III/IV to market (they had two botched attempts), and have ended up selling re-badged Fujitsu servers at the high end. Hell, Sun did not even create the initial Niagara design, they bought it from Afara Web Systems. Sun has no credibility left when it comes to their in-house RISC design efforts – until Sun shows real Rock systems running real workloads their customers care about, it is just a bunch of hot air and PR.

    IBM’s storage business could use a shot in the arm, and StorageTek is (was?) the leader in mainframe tape backup, so StorageTek could be a nice bonus. But, if that were so important to IBM, why did they not by StorageTek years ago, before Sun let it atrophy?

    I’m sure IBM thinks that Sun’s OS software is valuable, but how do they make money off of it when Sun could not? IBM has done a much better job profiting from Java than Sun ever did, and IBM has a real multi-faceted, multi-billion dollar enterprise software business. But they already have a successful enterprise DB – do they need MySQL? They already have a successful Java middle-ware stack, do they need Glassfish? And what the hell do they do with Solaris? Solaris is still popular, widespread, and highly regarded (you can’t say all of those things about AIX), but I can’t imagine IBM going with Solaris over AIX.

    I guess all that’s left is the customers?

    • AMDisDEC
    • 11 years ago

    OMG!
    This IBM/Sun thang would have far reaching industry wide ramification across an ocean of software and hardware fronts.

    So many that, I highly doubt this acquisition will actually happen.
    How much debt is IBM carrying these days?

    • just brew it!
    • 11 years ago

    Sun seems to be struggling to remain relevant. One of the ways they’ve tried to do this is by getting more involved (via acquisition) in Open Source projects. But by most accounts, Sun’s OSS efforts have yielded mixed results. Although OpenOffice and MySQL are widely deployed, the developer communities associated with them are increasingly dysfunctional. VirtualBox seems to be doing OK, but is still playing catch-up, and doesn’t have the muscle to seriously challenge VMware in the enterprise space. And Java continues to limp along (pretty much like it always has).

    Perhaps IBM — a vendor who seems to “get it” when it comes to OSS — can turn things around. At least on the software side of the house…

      • UberGerbil
      • 11 years ago

      Well, I guess MySQL would fit in well as DB2 Jr, and I’m sure they could find better ways to push Java than Sun has.

      But the hardware side of the equation is a mess. IBM already has several major server lines (3? 4?) — what use do they have for SPARC? Do they just try to sell that off to Hitachi or somebody? I’m sure the Niagara and Rock stuff is interesting to IBM, but it doesn’t really dovetail well with any of their POWER stuff… and it’s hardly worth the price of Sun. Sure they get some business from Sun’s StorageTek division, but that’s small potatoes too.

      And the OS side is kind of screwy also. IBM is already promoting AIX, zOS, Linux, and Windows — what use do they have for Solaris? Do they just set it free in the OSS community to wither (or not)? Do they try to migrate Solaris customers to AIX, or vice versa?

      It certainly reduces the diversity in the server market. Right now the non-x86 market is Itanium (mostly HP), Sun, and IBM. The “Unix” market is mostly those three also. So this takes things down to two, and I suppose that’s a stable (if boring) business where you hope to keep upselling things over and over, so the only real way to grab marketshare is to buy one of the competitors.

      So I’m not entirely sure what IBM thinks they’d be getting for their $7B. Real estate in silicon valley, some talent, some more server marketshare, and some technology — MySQL, Java, Niagara and Rock.

      I wonder if Cisco moving into the server market had any influence on this. I doubt Cisco was going to buy Sun, but IBM could still be viewing this as a defensive move: if Sun customers were going to bleed away to Cisco, IBM would rather have a crack at them first.

    • herothezero
    • 11 years ago

    I always laugh when people use IBM as an example of what happens to big companies that “fail” to change–usually in reference to M$. Seems like IBM is changing just fine. Sun, not so much.

    If M$ hews to IBM’s model, they’re going to be around for a long time to come.

    • Satyr
    • 11 years ago

    Oh God. What would IBM do to Java? Mnngh.

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