Thursday, March 19, 2009

IBM buying Sun? I don't get it.

The entire IT and business press has been atwitter (and Twittering), for the past few days about a rumor that IBM may be making a play for Sun. With Cisco's UCS announcement on Monday that put Cisco into competition with everybody in the IT universe, this IBM/Sun rumor jacked-up the blog-o-sphere to 11 on the frenzy-meter. The Wall St. Journal seems to have been one of the starting points for the rumor, and the headline reads "IBM in Talks to Buy Sun in Bid to Add to Web Heft." That's fairly low-key, really, for what would surely be a tectonic event in IT.

The problem is, almost nobody "gets it." When discussion this around the office and with colleagues in the industry, the basic reaction is, "Why would IBM do that?" Sure, Sun has struggled for a few years following the popping of the overheated tech-bubble in 2000, and it's understandable that they might be looking for a good merger. Sun still has many assets including a large customer base, good technologies (both on the hardware and software side), and a number of good products. So, the seller's motivations are well covered and they actually have things to sell. It's the buyer's motivations that everybody struggles with.

The press is starting to do a double-take, too, as it moves past the news phase to the analysis phase. Dana Gardner at ZDNet makes his opinion plain: "IBM buying Sun Microsystems makes no sense, it's a red herring". Dana thinks Sun might have floated the rumor itself to test the reaction to the idea. Om Malik at GigaOm says "Why Cisco, Not IBM, Should Buy Sun". In short, everybody seems to be scratching their heads.

For me, it just seems like Sun and IBM already compete in so many different areas that it would be hard to integrate Sun into IBM. For instance:

  • Sun and IBM couldn't be more divergent in terms of corporate culture. That alone makes any integration difficult. Would Sun employees really become long-term IBM employees?
  • The same thing goes for Sun and IBM customers. While an acquisition of Sun would clearly bring IBM a large customer base, do those customers really want to buy from IBM? Would they stay as customers, or would the acquisition simply precipitate a decision to choose another vendor? I was at HP when it acquired Apollo in 1989. Just following the acquisition, HP had great market share in the workstation market, but many Apollo customers had abandoned HP just a few years later, and most of the market share gains had disappeared. The same thing could happen with IBM.
  • IBM already has its own versions of most of the products that Sun has. Servers? Check. Operating systems? Yup, more than you can shake a stick at. Processor architectures? Yup, oodles of those, too. Database software? Yup, lots of that. How about Java? Yea, IBM even does well there. Any acquisition of Sun by IBM would force IBM to reconcile and merge all these competing products into the overall portfolio, something that IBM has lots of experience with over the years, but why go through all of that for little other gain?

In short, I just don't get it. I'm thinking that this is more rumor than fact, but I've been wrong about corporate acquisitions before, and there may be something I'm missing.


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