I openly speculated last January about who might buy Sun Microsystems since investors were trading shares for Sun’s cash value and little more. This morning Internet cables were buzzing over IBM’s alleged discussions to buy Sun for about double the current share price.
If the rumors are true this will go down in the annals of the technology market as one of the great milestones, and perhaps not a good one.
IBM is if nothing a shrewd entity. Outside of Congress, making a $6B investment is not trivial for anyone and IBM will certainly invest more wisely than the set of currently elected simpletons. Yet doubling the going price for all shares of Sun is a seemingly extravagant gambit and indicates that IBM sees something of value that the market does not, and they want to keep competitors away.
What does IBM want to acquire? When walking down Sun’s product list we can make some reasonably safe assumptions:
SPARC: IBM may see some intellectual properties in Sun’s chip design, but it is doubtful the patent portfolio is worth Big Blue’s attention. IBM’s Power processors might achieve some added oomph, but the market is moving ever onward to commodity computing in clouds. It is doubtful that IBM thinks SPARC innards would even slow that trend.
Storage: Sun overpaid for Storagetek and never realized the value of the product portfolio. This says a lot about Sun’s market clout, which is none. Storage is a growth market as we upright apes continue to horde bytes as if the Internet itself was scarce. IBM has storage solutions covering all the Sun corners. It is unlikely there is some game changing component therein.
Solaris: UNIX is dying thanks to Linux, and IBM has its own mutant variant called AIX. If the deal goes through Solaris will live as an obscure Open Source project after being jettisoned from the IBM Death Star.
Networking, desktops, and other hardware: All uninteresting markets or where IBM already has superior market position.
This leaves software, a market in which Sun has made repeated mistakes but still retains gravitas. Glassfish, Netbeans, Sun Studio, and Identity Management are all throw-aways. MySQL is of minor interest to IBM who still touts DB2 as the single biggest threat to Oracle (which it is not … market trends are) but gives IBM a possible block-and-grow strategy against Larry. StarOffice is intriguing to continue IBM’s perpetual push against Microsoft. Sun’s virtualization products have potential, especially the Virtual Data Center (VDC) management console and to a lesser degree Sun’s desktop virtualization backend (which would put IBM in competition with Citrix and dovetail nicely into p-clouds, and area IBM is not ignoring). There are gains to be made by buying Sun’s installed base for telecommunications and shunting competitors.
Then there is Java.
Despite being (more or less) Open Source, Java is a linchpin in daily computing. Your browser runs Java. Your cell phone runs Java. Embedded devices run Java. Enterprise server applications are written in Java. This set of technologies has an infrastructure reach broader than anything aside from Linux, and with a little work Java wouldn’t even need Torvald’s virus.
IBM is no stranger to Java, having adopted it as one of its own. In Java’s early days of popularity, IBM employed more Java programmers than Sun, using Java as the backbone of their own products and thus detaching themselves from competitors (i.e., IBM products would work on competitor platforms without IBM having to get in bed with the competitors). IBM can gain from taking leadership of the world’s second most successful software technology after Windows (please note I said successful, not usable). Since server-side Java is popular in enterprises and since IBM supplies entire data centers, adding Java management is a crown jewel that will solidify IBMs enterprise dominance while HP is splitting itself between business and consumer markets (though they are doing so quite well).
IBM’s purchase of Sun is a multi-part strategy. First, it consolidates the IT hardware market which needs it. IT hardware is rapidly commoditizing, and commodity markets tend to reduce the number of competitors. Say bu-bye to SPARC, Solaris and other also-rans.
Second, it is a blocking maneuver. HP, Dell, Fujitsu and some others would like to own parts of Sun and could make good use of them. IBM’s purchase would prevent this and keep those competitors in a weaker position.
Third, a few desirable piece of Sun will augment existing IBM product lines or move IBM into a greater market leadership position. MySQL, Java and VDC are examples of pieces of p-clouds that combined with other IBM infrastructure components help to create a whole product for new millennia datacenters.
Now if those damn mainframes would die already …