IBM may buy Sun: Why?

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On September 2008, I asked the question, “Is the Sun rising on Cisco?”  If Cisco truly wanted to redefine the industry, then combining Sun’s portfolio with Cisco’s business and market acumen would have been brilliant.  Ultimately, Cisco chose to go the route of UCS while Sun remains an attractive takeover target.

Today, Reuters is reporting that IBM is in negotiations to purchase Sun for “at least $6.5 Billion.” However, I find it hard to believe that IBM would pay a 100 percent premium for a company that is losing money, talent, and market share. Additionally, the speculation is IBM wants Sun to bolster their server products but the diamond in the rough may lie within Sun’s Virtualization and Software Divisions.

Sun’s has many strengths:

  • Sun has impressive high-end and mid-range servers
  • Sun has wide and deep storage offerings including StorageTek
  • Sun’s OSS Reach: MySQL, xVM, Java, opensolaris, OpenOffice, GlassFish
  • Sun has a solid channel and international strength
  • Sun Solaris is still rock solid
  • Next generation database: Greenplum

What IBM would gain:

  • Sun’s 9.3% server market share
  • Database market share dominance over Oracle (DB2 plus MySQL)
  • Instant credibility within x86 virtualization and cloud computing
  • Increased market share in storage and storage back-up
  • End the Java feud and intellectual property war with Sun
  • Disruption with opensolaris, openoffice, xVM, and MySQL

The Risks:

  • Sun is bleeding money
  • Sun is bleeding talent
  • Sun is stuck in the dot-com bust
  • Sun needs to revitalize their channel (more products service)
  • Sun needs attention and leadership

In the end, I am rooting for Sun.  I wrote that “if there is any executive team on the planet that can revive Sun it is John Chambers and company”, but I am sure that IBM could do the same.  What Sun needs is a machine to sell, market, and develop their vision and strategy across an expanded channel and customer base; IBM fits the bill.

I hope Reuters is correct, and today is a sunny day for the employees at Sun and the industry at large.

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