IBM-Sun deal: Microsoft is in the cross-hairs

IBM's impending deal to buy Sun is aimed squarely at one of Microsoft's biggest vulnerabilities: In the server market and among developers, where Linux has a big presence, and is about to get much bigger. Microsoft CEO Steve Ballmer says the deal could help Microsoft, but the truth is, he's just blowing smoke.

The New York Times has an excellent analysis of the deal, in which it notes that the buy will be all about software, not hardware. IBM began exiting the hardware business a while ago, and since then it's been thriving. It has no interest in going back. It's buying Sun not for hardware, but for software expertise and market share, as well as Sun's presence in the data center.

David M. Smith, an analyst at Gartner, told the Times that "The technologies of greatest interest to I.B.M. are Java and Solaris, and those are notably not hardware technologies." As the newspaper notes, IBM uses Java in its software development, and promotes Eclipse, Java-based tools for developers. Sun, of course, invented Java. But IBM and Sun have been feuding, which makes life easier for Microsoft to promote its own development tools. Michael A. Cusumano, a professor at the Massachusetts Institute of Technology’s Sloan School of Management, told the Times, an IBM purchase of Sun "would unify those warring groups and make for a stronger front against Microsoft."

IBM and Sun are also big backers of Linux, and having these two behemoths united certainly isn't good news for Microsoft. Sun also owns MySQL, the open source alternative to Microsoft SQL Server.

In addition, the Times notes:

Together, I.B.M. and Sun would have about 65 percent of the market for server computers running the Unix operating system and 42 percent of the total server market, measured by the dollar value of the market.

That spells bad news for Microsoft in the server market.

Ballmer, meanwhile, is pretending that the IBM-Sun deal would be a good thing. The IDG News Service quotes him as saying:

We have a lot of competition with IBM, and I don't think it will change strategically. I think it gives them a year or two where all they're doing is digesting it. I relish that year.

That's possibly one of the most short-sighted statements ever uttered by a CEO. It's not the next year or two that Microsoft has to worry about in the data center and server market --- it's the next five years, ten years, and beyond. If the IBM-Sun deal goes through, they could very well be some very tough years for Microsoft.