IBM Targeting Sun for Takeover: Linux, MySQL Potential Winners
Mar. 18th, 2009 by The VAR Guy
Reports are swirling that IBM is seeking to acquire Sun Microsystems for at least $6.5 billion. If a deal happens, what does that mean for the future of Solaris, SPARC, MySQL and other technologies that overlap with IBM’s core product portfolio? Will HP give Sun a call and offer a competitive bid? The VAR Guy offers four predictions about the potential IBM/Sun combo. Yes, Linux dominates the conversation.
Generally speaking, The VAR Guy isn’t a fan of big IT mergers and acquisitions. Check the stock valuations over time and you’ll find most M&As don’t deliver the promised synergies (examples: Novell/WordPerfect, AT&T/NCR, AOL/Time Warner, Symantec/Veritas and the list goes on).
Let’s Make a Deal
Still, The VAR Guy gives IBM’s potential Sun takeover a strong thumbs up. Why? Because Sun is stuck in purgatory but going to H***. The company has a strong line-up of open source solutions (MySQL, open source storage and so on) but those products generate pennies in revenue compared to Sun’s legacy business (SPARC, Solaris, etc.), which is imploding.
If IBM does acquire Sun, The VAR Guy offers the four following predictions:
- Long-term phaseout of Sun’s RISC-based SPARC processors. IBM already has RISC processors (the POWER line). And let’s be honest: Major companies are consolidating their legacy RISC data centers around virtualized Intel servers. Generally speaking, IBM does a great job supporting legacy hardware for years and years. But the real R&D would occur on Intel with some sort of potential POWER/SPARC combo as a high-end niche.
- Melding of Sun Solaris with IBM AIX. Here again, the world has too many Unixes. Instead of supporting two Unixes, IBM will find a creative way to meld their feature sets into one operating system that competes with HP-UX. But ultimately, that would be a placeholder strategy because all roads lead to Linux. And let’s not get into an OpenSolaris debate. The VAR Guy strongly doubts IBM would promote OpenSolaris as a major Linux alternative.
- MySQL Wins Big: Owned by Sun for more than a year now, MySQL’s popularity continues to rise but staff departures and internal debates have bruised the open source database a bit. Backed by IBM Global Services and Big Blue’s reseller channel, MySQL would thrive. And coupled with DB2, IBM gains a powerful one-two punch alternative to Oracle and Microsoft SQL Server.
- Linux: The biggest winner of all. By consolidating Sun’s hardware and software into IBM’s own technology blueprint, the march toward consolidated Linux data centers and even Linux desktops would accelerate. Trust The VAR Guy on this. He’s right.
The Simple Truth
Still, IBM potentially buying Sun is really about three things: Consolidating technologies, consolidating staff and taking control of Sun’s influential customer base, which includes much of Wall Street and many Global 2000 firms.
Sun customers shouldn’t panic: IBM has a strong track record of legacy product support. In fact, Sun customers should worry more if IBM doesn’t buy Sun…
Oh, and one closing thought: Who leaked IBM’s potential bid price for Sun and why? Is somebody trying to bring HP into the negotiations to drive up the bid for Sun? Hmmm.
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I don’t know about that, I can tell you that Sun’s financial situation is not in pretty good shape, they have diversified a lot, and they are backing up a lot of open source projects now (MySQL, NetBeans, GlassFish, VirtualBox), not to mention Java, however their hardware division got really behind, and now it is not profitable at all.
However, I can’t tell what is going to happen with all Sun’s backed Open Source projects in the case of an acquisition by the Big Blue, would these projects turn to be closed commercial ? would they continue to be open and well supported as of today ?.
I am concerned about this, because I am a heavy user of such software.
Iveen: Generally speaking, IBM has been very good to the open source industry. Remember: Former CEO Lou Gerstner put Linux on the corporate map by having IBM invest more than $1 billion in Linux efforts more than a decade ago. And IBM seems to have multiple open source projects of its own these days.
Also, IBM in December 2008 announced a plan to offer virtualized Ubuntu desktops (on centralized servers) for businesses that needed to support 1,000 or more users.
Perhaps The VAR Guy sounds a bit naive. But he thinks Sun won’t be able to recover on its own. There’s just too much legacy hardware (where sales are falling fast).
I am very curious to see what is going to happen with Sun. Regardless of the possible IBM purchase, Sun is changing direction. They are using their expertise with servers and open source software to enter new product categories, including Storage and Networking. Both of those areas required specialized hardware before, but now Sun can use advanced server technology to provide a much more cost-effective alternative in those areas.
I am impressed with Sun’s new storage appliances, the 7000 series, which uses optimized SSD drives to provide accelerated cache. They also provide a powerful GUI so that Solaris is mostly hidden.
http://www.sun.com/storage/disk_systems/unified_storage/
Regarding the move to networking using open source software, I think it is a great idea, especially since Vyatta is already currently doing that! (Perhaps Sun will want to purchase Vyatta)
I am especially interested in hearing what Jonathan claims is the third area that they are going to expand into using their servers. Perhaps he will talk about a good synergy between Digium/Asterisk and Sun?
For more background, read/watch Jonathan Schwartz blog entries:
http://blogs.sun.com/jonathan/
Cheers,
Tristan
If I were you I would stick to business reporting. AIX is not real Unix and could not be ‘blended’ with any other Unix variant. What is most likely to happen is that AIX will inherit zones/DTrace/ZFS and a few of the other goodies in Solaris 10 that the Linux folks dont have. Put those into AIX and then you have a Unix that is worth more than Linux. Unix has needed a hero it can sell against the one that is free.
Tristan,
The VAR Guy respects Jonathan but he inherited quite a proprietary mess. Kudos to him for the open source storage push, MySQL, etc. And yes, Digium/Asterisk would be a wild addition but something like that sounds a little far fetch right now considering Sun’s financial performance.
Paul: Here’s the wonderful thing about about TheVARguy.com: You’re allowed to slam our resident blogger anytime.
Paul:
Your comment has the ring of truth. I’m thinking back to the time when SCO and IBM were working together to create a 64 bit UNIX for the Intel Itanium processor and the project came crashing to the ground because of a problem with IBM’s compiler. Or so the people at SCO said.
VAR Guy:
I applaud your stance on Linux (it’s what I use) but I don’t think you can compare Linux to Solaris; Solaris is a much more mature and stable OS and better suited for the data center. IMHO.
I too am not a big a fan of big IT mergers and acquisitions and I can see the pros and cons from both sides.
But $6.5 billion?!
Frank: True, Solaris continues to out-perform Linux on many fronts. But do you really see IBM maintaining two separate Unix development teams (AIX and Solaris) if the Sun acquisition occurs?
The VAR Guy things the big, big, big driver for this potential deal is cost savings: IBM will take lots of costs out of Sun’s business, driving up gross margins while gaining control of Sun’s installed base/global 2000 accounts…
VAR Guy:
“But do you really see IBM maintaining two separate Unix development teams (AIX and Solaris) if the Sun acquisition occurs?”
I wasn’t questioning whether IBM was going to maintain AIX, Solaris and Linux. I have no idea what this one is all about. In my world, nobody talks about AIX. Solaris is revered as a god but used rarely. Linux is used as an appliance (well, I use it for my desktops too but who ever listens to me?). All the buzz is about the over hyped and now finally almost as good as a *nix product (so why the heck spend money on this nag? You know who I mean…). Is SUN a competitor to IBM? I have no idea. What does this deal have to offer IBM? A better UNIX? Yes, but is that what IBM is looking for? Maybe all of the above is a red herring. You could be right about “IBM will take lots of costs out of Sun’s business, driving up gross margins while gaining control of Sun’s installed base/global 2000 accounts”. From my perspective IBM is shifting away from hardware and (to a degree) software and is moving towards services.
But again, $6.5 billion? Thats more than I make in …. ever.
Only time will tell.
Frank: You offer some intriguing thoughts. And yes, the more The VAR Guy thinks about this the more this is mainly a way for IBM to consolidate the industry and gain account control at a relatively low price. During the dot-com boom Sun’s market cap was $200 billion. Then, Sun imploded. Now, IBM’s offer represents a major (80%?) premium over where Sun’s shares had been trading. But it’s still a cheap buy… comparatively speaking.
Whaaat about Java?
I think Java as a platform has a lot to gain from this.
Netbeans and Eclipse teams have done a lot of good things, but joined I think they would do a better job than now. There was an attempt to merge the two apps, but so far neither company would make license concessions to the other. This would be a great way to counter act .Net.
A little Solaris DNA injected into Linux would make it scalable on a level it just can’t quite do at the moment. If IBM gets a hold on Sun it’s all good me thinks.
The VAR Guy must concede: He never tried Solaris… but the OS sure has loyal fans. Interesting follow-up post from Matt Asay over on CNet, who argues IBM can teach Sun a few things about open source.