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  • 03.31.09

Blue Sunrise

IBM contemplates buying Sun, but for what reasons? IBM intends to use Sun’s software assets to further commoditized the IT market and drive down the margins of their competitors.

 

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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.

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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).

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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 …

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