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|IBM + Sun Microsystems|
|Topic Started: Mar 22 2009, 07:26 PM (138 Views)|
|RichAlfante||Mar 22 2009, 07:26 PM Post #1|
Could IBM be Sun's savior?
Industry watchers comment on rumors that IBM is in talks to acquire Sun.
By Denise Dubie , Network World , 03/18/2009
The high-tech rumor mill churned at high speed Wednesday as industry watchers debated the good, the bad and the ugly about a potential pairing of IBM and Sun, if Big Blue does indeed acquire its long-time rival.
IBM and Sun compete in many markets, such as servers, virtualization and cloud computing. But while IBM excels, Sun continues to fall short -- making it a candidate for an untimely death or an opportunistic acquisition, according to analysts.
"If this deal is for real, this would be the most graceful way for Sun to exit the market -- particularly since C-teams are cutting back on the number of IT suppliers they have to deal with," says Jasmine Noel, a principal analyst at Ptak, Noel & Associates.
For Sun, an acquisition could put an end to speculation that the server vendor is going out of business. But at the same time, an IBM buyout could burden Big Blue with too many overlapping products and would worry Sun customers about the future of their much-loved products.
"Sun is in trouble, without doubt, and with a strong cash reserve it is a very attractive takeover target for any large organization that can afford them," says Andi Mann, research director at Enterprise Management Associates. "For IBM, it is a questionable move. It definitely makes sense in some areas, but there are problems here too -- most specifically, all the product overlap."
For instance, IBM and Sun both develop Unix operating systems (AIX and Solaris), as well as open source operating systems with Linux and OpenSolaris. They both deliver databases with IBM's DB2 and Sun's MySQL, and perhaps the most obvious product duplication, the two vendors' respective server and storage portfolios. Other overlap exists with virtualization, e-mail and collaboration servers, developer tools, security and productivity applications, and to a lesser extent, management software, Mann says.
Mann says loyal Sun customers, in particular Solaris customers, might witness the products they most like become "at best, marginalized in the IBM sales machine and at worst, unceremoniously dumped." Without a commitment from IBM to put its considerable strength behind Sun products, customers would have to be concerned about the future of their current Sun investments if a deal is in the works.
"IBM would be cannibalizing its own (mostly) profitable business lines with a whole raft of second-tier and open source solutions," Mann says. "I think this would be absolutely awful news for Sun and its customers."
Noel argues that while IBM and Sun both develop cloud-related products, Big Blue trumps Sun's efforts, and that a pairing could produce better cloud computing and monitoring tools for IBM.
"IBM is very interested in figuring out how to fold cloud computing and the deployment/management of cloud resources into their big picture of Service Management. Sun has been making lots of cloud noise but not much cloud money -- maybe IBM can change that," Noel says.
Some analysts say the deal could rival Cisco's recent Unified Computing System (UCS) launch in less obvious ways. For instance, Sun has desktop virtualization technology that could help IBM better compete with VMware, a key partner in Cisco's recent news. And Sun's Crossbow virtual networking initiative could give IBM the network services needed to offer an equivalent to Cisco's server market entry.
"Sun's desktop virtualization/thin client offerings and its Crossbow virtual networking initiative are two key offerings that might not get mainstream attention as everyone tries to digest what this deal might mean. The Sun VDI offering would give IBM its own core virtual desktop offering, from thin clients to the back-end infrastructure, making it more competitive with HP, and less reliant on external partners such as VMware," says Phil Hochmuth, a senior analyst at Yankee Group. "Sun's Crossbow initiative, which provides virtualized network services and interfaces for Solaris, is similar to Cisco and VMware's combined efforts to converge virtual network and server management and provisioning. So from a tit-for-tat standpoint, if Cisco's server market entrance is a thumb in IBM's eye, the potential of Crossbow in IBM's hands could be a jab right back at Cisco."
If IBM is planning to acquire Sun, negotiations would have had to begun prior to Cisco's recent news, but industry watchers say Cisco's move could impact this and other server vendor acquisitions.
"As a response to Cisco, it certainly heats things up, but doesn't really change the game. Perhaps it takes Sun off the market so Cisco [or EMC] can't buy them, and that might be valid reason enough for IBM to move. But this is not a typical IBM acquisition," EMA's Mann says.
If the rumors are true, IBM buying Sun could help the vendors adapt more quickly to a changing market, others say.
"Clearly, Sun continues to have problems. However, it has some very good software assets that it has not found a good way to monetize," says Judith Hurwitz, president and CEO at Hurwitz Associates. "There is a relationship to the Cisco announcement which is very significant. Cisco is potentially commoditizing the server. If this does come to pass it will have dramatic implications for the hardware market and could change the balance of power. Therefore, we expect that it will lead to a flurry of acquisitions and I wouldn't be surprised to see IBM acquire Sun."
|RichAlfante||Mar 22 2009, 07:28 PM Post #2|
IBM + Sun: How a merger would impact IT
Clouds, servers, open source, Java, and competition with HP would all be affected by potential acquisition
By Jon Brodkin , Network World , 03/18/2009
The IT industry is abuzz with the rumor that IBM is going to purchase Sun for nearly $7 billion, first reported in the Wall Street Journal. It's all speculation until a deal is confirmed, but the combined reach of an IBM/Sun company would be vast. Here are nine topics to consider.
• Cloud computing. Both IBM and Sun are potentially big players in cloud computing markets – both as providers of IT services over the Web and as providers of server and storage infrastructure necessary to build cloud platforms. Even as rumors swirled about the potential IBM/Sun acquisition, Sun was announcing new compute and storage services to compete against Amazon's Elastic Compute Cloud and Simple Storage Service. But it's the cloud infrastructure piece that might prove most compelling to both companies. "The companies have a similar view of the cloud," says Pund-IT analyst Charles King. "Frankly, both IBM and Sun are basically plumbing suppliers for IT. They’re very much focused on the infrastructure offerings."
• Servers. Cisco's entry into the blade server market was bound to cause some reaction among competitors. Could IBM's rumored purchase of Sun be the first response? In any case, a combined IBM/Sun company would be formidable in the hardware markets. IBM already owns 36% of the worldwide server revenue market share with nearly $5 billion in fourth-quarter sales, according to IDC. Purchasing Sun would give IBM another $1.2 billion in quarterly revenue and raise its market share to more than 45%. That would give IBM more share than HP and Dell combined. The three companies together would account for 85% of the server market. One long-term question: will IBM urge Sun's Sparc customers to migrate over to servers based on IBM's Power processors?
• Storage. Acquiring Sun would also give IBM a significant boost in the external disk storage system market. IBM grabbed 15.7% of worldwide market share in the fourth quarter, down from 17.7% year-over-year, IDC says. Buying Sun would push IBM over the 20% mark but still leave it short of EMC, which is sitting pretty with 23.3% of market share. Purchasing Sun also would eliminate IBM's biggest competition in the high-end tape storage market. But some analysts question whether it's even worth buying Sun, which has seen its external disk storage market share plummet.
• Virtualization. IBM invented virtualization decades ago when the mainframe was king, and has gained commercial success more recently with a hypervisor for its Power-based servers. IBM has resisted building a hypervisor for x86 processors. That product gap could be filled with Sun's xVM hypervisor for x86-based systems, but given xVM's limited market reach IBM executives may not consider that a big deal. The hypervisor isn't all that exciting anymore – it's how you manage virtualization that's most important, notes analyst Judith Hurwitz of Hurwitz & Associates. Both IBM and Sun have focused on partnering with hypervisor vendors VMware and Microsoft to enhance the capabilities of virtualized servers, King says.
• Competition with HP. As mentioned earlier, IBM is already the king of server market share, ahead of rival HP, and acquiring Sun would give Big Blue a significantly larger numerical advantage. "From a competitive standpoint acquiring Sun would put IBM way ahead," King says. "I don't really see HP erasing or catching up against that for years, if ever."
Separately, Sun's virtual desktop software could improve IBM's standing vs. HP.
"The Sun VDI offering would give IBM it's own core virtual desktop offering, from thin clients to the back-end infrastructure, making it more competitive with HP, and less reliant on external partners such as VMware," says Phil Hochmuth, a senior analyst at Yankee Group.
• Database overlap. IBM and Sun are major players in the database management software market, with IBM producing DB2 and Sun having acquired open source MySQL a year ago for $1 billion. Acquisitions involving overlapping products are often cause for concern among customers, who in this case might wonder if IBM would stop supporting and updating the MySQL database. But IBM already supports multiple database management systems, partners with outside database vendors and is quite friendly to open source, according to software analyst Curt Monash. "There's little reason to think IBM would orphan MySQL or any other DBMS product," Monash writes.
• Speaking of open source… Sun has continually stressed the importance of open source software and uses phrases like "open storage" and "open cloud" to describe its various product offerings. This transition may well be part of what attracts IBM to Sun. "Sun's deeper move toward open source and open standards under [CEO] Jonathan Schwartz is very resonant with what IBM is doing in the open source and open standards space," King says.
• Java. IBM could certainly be interested in having a bigger stake in the Java platform, which is largely controlled by Sun. "Java is important to IBM because it runs across all of the IBM servers, and it's a foundation for IBM's middleware stack (WebSphere for transaction-processing, IBM DB2 database, IBM Tivoli systems management framework) and Lotus Notes," IDC analyst Jean Bozman writes in an e-mail. How the Java community would react to IBM ownership of Sun is another question. Rival Java vendors have spoken out against Sun's control of the Java platform, with some urging Sun to sever its ownership of Java and the Java Community Process, which helps dictate the future of Java by developing technology specifications and reference implementations.
"IBM has been one of the major powers pushing for more openness in Java, so at first IBM taking control of Java would seem to bode well in that regard," Javaworld blogger Josh Fruhlinger writes. "But IBM has a definite interest in keeping Java open now because that lessens Sun's control over it. Once IBM owns the right to the Java trademarks -- and once the Java universe doesn't have an outside power as big as IBM angling to keep Java open -- things might get very different, very quickly."
• Clash of cultures? In terms of technology, IBM and Sun have more in common than they do in conflict, King says. But in terms of culture, Sun prizes innovation and "sometimes contrarian" thinking that may not mesh with the formal corporate world of IBM, King says. "A big challenge for IBM is to bring Sun and employees into the fold in a way that maintains that level of innovation Sun is well known for," he says. "Both companies to my mind are among the most innovative players in the IT space. They've got a lot in common. The thing for IBM to do is figure out how they can maintain that commonality of interest without insisting that Sun become too homogenized."
Network World Senior Editor Denise Dubie contributed to this report.
Source: Network World
|RichAlfante||Mar 22 2009, 07:30 PM Post #3|
Report: IBM is in talks to buy Sun
By Dan Nystedt , IDG News Service , 03/18/2009
Global technology giant IBM is in talks to buy Sun in a deal that would expand its server market share, the Wall Street Journal reported Wednesday.
IBM may pay as much as $6.5 billion in cash for Sun, the newspaper reported on its Web site, without naming its sources. That amount of money would be nearly double Sun's closing share price on Tuesday of $4.97 per share.
Sun had revenue of $3.2 billion last quarter, around $1.2 billion of it from server sales. That put Sun in fourth place in the server market, behind IBM ($4.9 billion, or 36% of the market), HP ($3.9 billion or 29%) and Dell ($1.4 billion).
Sun also has a software business, although that brings in little revenue. It made just $42 million last quarter from sales of its Solaris operating system and associated management and virtualization software. In February it struck a deal with HP to expand distribution of Solaris, complementing deals struck in 2007 with IBM and Dell.
It has a lot of open-source software, including the MySQL database, which it hasn't been able to monetize. It reported just $81 million in sales of MySQL licenses and related infrastructure last quarter, after paying $1 billion for the company in January last year.
A merger between IBM and Sun, if it came true, would have benefits for both companies, according to Nathaniel Martinez, program director in IDC's European System Infrastructure Solutions.
Regarding MySQL, "bringing IBM into the picture, with its services arm, could be something that could turn that into actual dollars in the future," he said.
Sun also has a huge installed server base, and many of them are currently looking at migrating to Linux. A deal would be a way for IBM to grab Sun customers who are using RISC-based servers, Martinez said.
Also, IBM is working on making itself the choice for high-end servers, and customers using Sun's Solaris operating system are high end and extremely loyal, according to Martinez, who also gives credence to speculation that it's a competitive move from IBM in response to Cisco's entry into the data center on Monday.
But a deal of this size also comes with its fair share of challenges. There would obviously be products that overlap, according to Martinez, including areas such as servers, databases and storage, and wherever IBM has an office, Sun also has one, he said.
The different cultures at IBM and Sun would also be a challenge, but Sun's technology focused culture could be a boost for IBM, which is more and more seen as a service provider, according to Martinez.
The Journal report cautioned that while the two companies are holding discussions, a transaction may not occur.
It isn't the first time that rumors have surfaced about Sun being acquired. In the past there have been reports that Dell or Fujitsu Siemens could buy the company, Martinez said.
Officials from Sun and IBM in Europe declined to comment on the report.
Source: Network World
|RichAlfante||Apr 6 2009, 09:42 AM Post #4|
IBM, Sun unable to reach a deal, report says
By James Niccolai , IDG News Service , 04/05/2009
The companies are apparently unable to agree on a price and other terms
IBM and Sun have been unable to reach agreement on the terms of an acquisition, with the talks nearing collapse on Sunday, the Wall Street Journal reported.
Sun's board rejected a formal acquisition offer by IBM on Saturday, considering the offer price too low, the Journal said. Sun was also concerned that the offer gave IBM too much leeway to walk away from the deal, according to the newspaper, which cited unnamed sources familiar with the situation.
The two companies are reported to have been in merger talks since at least March 18. The acquisition, valued at about $7 billion, would extend IBM's lead at the top of the server market and give it control of Sun's Solaris, Java and other technologies.
But the companies had reportedly been haggling over a price, and on Saturday Sun rejected IBM's offer of $9.40 per share, according to The New York Times, which also said the talks have fallen apart.
Sun had been seeking assurances that IBM would not walk away from the deal even if it faced tough regulatory hurdles, the Times said, and IBM considered the requirement too onerous.
Sun has sent a notice to IBM terminating its right to exclusive negotiations, and IBM in return has withdrawn its offer to buy Sun, the Journal said.
Such brinkmanship isn't uncommon during late-stage negotiations, the paper noted, and the companies may yet resume talks. But for now, the stance between them was described as "confrontational."
IBM and Sun were first reported to be in merger talks two and a half weeks ago. Neither company has confirmed or denied that any discussions are under way.
IBM has conducted its due diligence of Sun and found nothing that would prevent it from buying the company, the Journal said.
If the companies fail to make a deal, it is unclear whether another large vendor will step in and bid for Sun. After IBM first expressed its interest in an acquisition, Sun's investment bankers shopped the company around to most large IT vendors over the winter to see if any others were interested, the Journal said, but none were.
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