IBM buying Sun? Why bother?

That was our first response when we saw a WSJ headline and a sampling of comments from the blogosphere, here and here, earlier this morning. And it still is.

Ever since the popping of the dot com bubble, Sun has been trying to redefine itself. At core, Sun has always been a hardware company –- initially CADCAM workstations, and then thanks to purchase of part of Cray Computing’s assets –- a server company. That was fine when Windows couldn’t provide the scale required for the running websites, and before clustered Linux blades proved the viability of low cost/no cost, eating Sun’s lunch. Sun had Java, but ceded the business and much of development tooling standards to IBM before the web development market fragmented with new, popular scripting languages.

So what should sun do when it grows up? Back in 2003, we suggested Sun eat its young in classic Silicon Valley fashion: junk the software business, where it has never made money, and bite the bullet on Unix staking a new line in the sand for 64-bit Linux. A lot of our friends at Sun stopped returning calls and emails after that. Had Sun done so, it would have enjoyed a 2 – 3 year head start, of course at the price of transitioning to a higher volume, lower margin business model for which it is now still struggling with.

Fast forward to the present, and Sun is several years into a strategy to become an open source company. Fine idea had it begun prior to Jonathan Schwartz’s watch. But Sun’s boldest move of recent, buying MySQL for a billion dollars, was great for grabbing attention, but was hardly a game-changer in that this little database-that-could could not carry a $5 billion overall business (it would have made more sense a couple years earlier had Sun already been well underway down a Linux road, which it wasn’t).

So what does IBM really have to gain from spending $6.5 billion? More share in UNIX servers? UNIX is not exactly a growing market these days. With Linux eating UNIX’s lunch, IBM has been already quite busy, thank you, pushing the middleware and management systems that do make money atop Linux, which doesn’t. Sun still has $3 billion cash stashed away from the glory days that it’s burning through. IBM has $13 billion, and healthy margins to boot, so why bother? Migration of the tiny base of NetBeans users to Eclipse? Sorry, that bird’s already flown. A land office market in MySQL (when IBM already has stakes in the more scalable EnterpriseDB)?

One could posit that this is a circling of the wagons following Cisco’s announcement of its Unified Computing systems initiative; however, Sun does not offer any of the missing networking pieces for IBM to respond to Cisco. It could also be interpreted as a move to blunt HP by adding more data center share – except that IBM already has the heft to counter HP and doesn’t need Sun’s incremental presence.

It’s also been speculated that IBM might pick up Sun and divest portions, such as the Solaris business to Fujitsu, as piece parts. But the question is, what family jewels are actually left?

Sun has been approaching various suitors over the past few months as it requires an exit strategy. But Sun will be a waste of IBM’s money, not to mention the time spent digesting a large acquisition of questionable added value. That leaves Fujitsu, Sun’s primary Solaris OEM, as the only logical suitor left standing.

Update: Progress Software’s Eric Newcomer, whose “night job” is co-chair of the OSGi Enterprise Expert group, has some interesting observations on what it’s been like to have been caught in the middle of the Eclipse vs. NetBeans battle.

One thought on “IBM buying Sun? Why bother?”

  1. Tony,

    It’s always a bit of a head scratcher when a struggling company gets bought. After all, it is struggling, which automatically makes its value dubious. I remember back in the late 80s and early 90s when struggling mid-sized banks where banding together to form large struggling banks, there seemed to be a disconnect there.

    Yet it sounds like IBM is kicking the tires, so what about Sun might interest Big Blue? My guess is Sun’s storage business, and in particular OpenStorage, is something IBM might feel it can turn into a cash cow.

    MySQL looks to have legs. Sun has an interesting portfolio of virtualization products. OpenOffice might be something IBM could use to cause misery for Microsoft as part of an in-cloud play.

    What interests me most, though, is what would IBM do with the software/Java business? It would probably keep the Java licensing stream flowing in order to keep making cash on 3rd party development platforms, Blu-ray discs, mobile devices and the like, but wither the JCP? I could see that and GlassFish (aka the working implementation of Java EE), which is now built on OSGi, getting folded into the Eclipse community. That would be a fairly big tectonic shift in the Java development world. Other things like OpenESB/JBI probably would be set free to sink or swim on their own.

    No matter the buyer, if Sun gets acquired, it will shake up the Java community. We can bank on that regardless of whether the buyer can bank on an ROI from the acquisition.

    Michael Meehan
    Current Analysis

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