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Steven J. Vaughan-Nichols

Cyber Cynic

The rise of the Blue Sun: IBM and Sun

24 comments

TAGS:acquisition, IBM, Java, Linux, MySQL, server, Solaris, Sun
IT TOPICS:Desktops & Servers, Enterprise Software & Services, Hardware, Linux, Management, Open Source, Operating Systems, Servers & Data Center, Software

The news broke this morning, March 18th, that IBM is talking to Sun about buying the company. Sources from both companies tell me that such a deal is in the works and it may be completed as early as this week.

Sun's pricetag may be as high as $6.5-billion with a large part of the deal being made with IBM stock. Sources indicated that what IBM wants is Sun's software businesses, not its x86 and SPARC server lines.

There are three possible hardware plays here. One is that part of Sun will remain as a hardware server firm. Another is that IBM will go ahead and buy the hardware line and merge Sun's x86s into its System x line and place SPARC within its System p division. Finally, some or all of Sun's hardware may go to a third company, such as Fujitsu, which is already in the SPARC business

Of course, in deals like this, there's many a slip between the cup and the lip. Still, I, for one, am sure that the deal will go through. While Sun CEO Jonathan Schwartz recently pointed out Sun's strong points--"over $3 billion in cash, and a nearly two decade history of generating positive cash flow. We've also got a set of technologies and people that continue to play an ever more vital role in the economy."--he didn't really address Sun's serious problems.

What Schwartz didn't mention was that Sun had laid off from 15% to 18% of its employees in November 2008, that's between 5,000 and 6,000 employees, after a quarter which saw a $1.68 billion quarterly loss. Even before the economy started its nose-dive, Sun had been bleeding red-ink for several quarters.

Things haven't changed for the better for Sun since then. In its latest quarter, even after the mass layoffs, Sun's revenue dropped 11%. Sun reported a net loss for the quarter of $209 million. With red-ink like this even $3-billion won't last forever.

What's more important is that Sun embraced open source too late to reap its benefits while at the same time it was saddled with its expensive SPARC server line. When the few companies that are still buying server hardware are buying x86 servers and blades, there's simply not enough buyers left for Sun.

If the deal does come through, this is what I see happening. First, I don't see IBM's support for Linux wavering for one moment. Linux has been very, very good for IBM. That said, IBM has already shown that it has no problem with supporting its own house brand of Unix, AIX. Because of this I'm sure IBM won't mind supporting OpenSolaris/Solaris for these operating systems' existing customer base. In addition, by certifying Solaris on IBM's BladeCenter, IBM may end up giving Solaris a new lease on life.

And, if former Sun customers do want to move to Linux? Then IBM, which just bought Transitive, which specialized in moving Solaris programs to Linux, is ready to help them make the jump.

I've heard some people wonder why, with all of IBM's interest in Linux, "Why are they buying Sun, when they could buy Novell?" The reason is simple. IBM has never had, and continues to have no interest in being a Linux distributor. IBM Global Services, which delivers integration, support, and service to Linux customers, is how IBM makes it billions from Linux. IBM is perfectly happy to let Red Hat, Canonical,and all the rest have the distribution and first-line support business.

IBM will also get more control over the powerful Java programming language. IBM has long supported Java through Eclipse. Encouraging developers to use Java on Linux and the AIX/Solaris family will only help IBM keep Microsoft out of server development circles.

Another feather in IBM's hat will be that it will get MySQL, the enormously popular database manager. When Sun bought MySQL, I thought it was the best move the company had ever made. I was wrong.

Sun mishandled its new acquisition. MySQL's top programmers left. MySQL's founder and still Sun CTO for its MySQL division, Michael 'Monty' Widenius said publicly that the GA (general availability) version of MySQL 5.1 was filled with bugs.

With the right management, say IBM's DB2 division, though, MySQL should still be a star. MySQL is the DBMS (database management system) of Web 2.0 businesses such as Twitter, Facebook, and WordPress.

StarOffice, the commercial version of the open-source OpenOffice office suite, will fit in perfectly with IBM's own play on OpenOffice, Symphony. StarOffice, itself, I suspect will be closed down.

By now, you've gotten the point. There's a lot of good stuff inside of Sun, which would work hand-in-glove with IBM's existing projects. As for Sun, they've been unable to fend off Linux and commodity servers in its server lines, and the company has also failed to successfully monetize Java, OpenSolaris, OpenOffice or MySQL.

Frankly, I'm only surprised that it's taken this long for a deal like this to materialize.

IBM buying Sun?

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IBM takeover Sun

Submitted by Anton Loeffen on March 21, 2009 - 9:45 A.M.

Sun should regain focus on business. If IBM thinks it can make money out of the Sun portfolio then why not Sun.
My opinion: blue ocean instead of big blue!
http://petto.typepad.com/antonloeffen/2009/03/blue-ocean-instead-of-big-blue.html

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I was wondering

Submitted by Alan Pae on March 19, 2009 - 6:54 P.M.

I was wondering how much of this might be attributed to Southeastern Asset Management looking to capitalize on their shares.

http://news.cnet.com/8301-1001_3-10073049-92.html

alan

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I'm suprised nobody

Submitted by Iwan Luijks on March 19, 2009 - 11:19 A.M.

I'm suprised nobody mentioned the server-software part of Sun; what about Glassfish, OpenESB, etc..? Where do these all fit in.

It will be a terrible mistake selling some or otherwise all of the SPARC system-division to Fujitsu, not because they won't be able to handle this kind of sidekick, but they just don't have this big of a name yet on this market, like IBM does.

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Huh? Fujitsu have been

Submitted by Anonymouse on March 19, 2009 - 8:57 P.M.

Huh? Fujitsu have been building supercomputers for about 20 years now. They build HUGE machines. They also build servers, laptops, and every computing gizmo in between.

Here, have a look at some old news (2002):

http://pr.fujitsu.com/en/news/2002/08/22.html

Today a SPARC M9000 might be comparable. I don't have the time to trawl Fujitsu's awful web site looking for their latest in big iron, but you can bet it beats Sun's own offerings (even if it also uses SPARC).

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there is good and bad

Submitted by Charles Robinson on March 19, 2009 - 8:00 A.M.

The good thing is IBM is so focused on Java (some would say "shoving it down customers' throats at all costs") that owning all the intellectual property rights will definitely help them. And I think their commitment to open source will serve Java and MySQL well. There is also a lot of opportunity for hardware consolidation, if IBM chooses to go that route. From a very broad business and FOSS community perspective, it looks good on the surface.

My biggest issue is IBM has no idea what to do with a passionate user community. They're used to their customers behaving like the mainframes they sell: cold, calculating, only looking at the bottom line. When IBM acquired Lotus in 1995, Lotus had a very vocal, very engaged, and very influential user community. After nearly fifteen years of IBM oppression the community has faded significantly.

MySQL has a passionate user community as well, so it will be interesting to see if IBM has learned any lessons from how they handled Lotus. I would like to think they would embrace it, like they have finally started to do with Lotus.

At the very least both Java and MySQL have deep market penetration, so it will be difficult for IBM to kill them.

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Wow - good news for SUN. I

Submitted by Anonymouse on March 19, 2009 - 4:20 A.M.

Wow - good news for SUN. I hope IBM does great things with the software. Hmm ... so IBM may end up owning Solaris (would it keep Solaris alive, release it to the world, or kill it and stick to Linux). IBM will also have a(nother) database, Java, OpenOffice/StarOffice ... Ooo. Look out, Microsoft! It looks like IBM is really serious about being a software heavyweight. I wonder if this has any relation to their hardware business or if it's just another unrelated thing done by one of their enormous departments.

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The IBM and Sun merger will

Submitted by Adam C. Sieracki on March 19, 2009 - 3:17 A.M.

The IBM and Sun merger will be a good counterweight to Microsoft...especially in light of Microsoft's overly-cozy relationship with the new Obama administration, which is handing the firm a $200B porkbarrel medical records programme. (Microsoft was a major contributor to BO, both to his campaign and inauguration).

Google seems to be testing OpenSolaris for use in its servers, and IBM hardware will probably end up there, as well.

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Have done with this deal already...

Submitted by Anon on March 18, 2009 - 10:26 P.M.

I'm seldom one to applaud more consolidation of wealth and power through corporate mergers, acquisitions and buyouts, but there are consolations here. Whatever happens to Sun's products when IBM buy them out, there's one thing that is virtually assured. There will thankfully, and finally be, little to no vacillating on whether things will be FOSS, Open Source or whatever. Sun's indecisiveness over the last few years has been infuriating, at best.

Have done with this deal already...

Cheers and applause from the front row!

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Where is Sun's Executive Team???

Submitted by Anonymous on March 18, 2009 - 9:18 P.M.

Why has none of Sun's executive team come out to comment on this situation/rumor? The longer they remain hidden in their bunkers the more fear and doubt it places in the minds of Sun's customers. To me, with each passing hour they remain silent is another brick in the foundation that this deal is getting done. If it was just a rumor, don't you think the Sun Executive team would have tried to squash it before it hit the press early this morning?????

The SUN is truly setting on one of the great innovation companies in the tech world...

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