Merger: Potentially the Best Outcome for Sun?

By Chris Preimesberger  |  Posted 2009-03-18 Print this article Print

For Sun, a potential merger is the best outcome that management and shareholders could ask for, Enterprise Strategy Group analyst Brian Babineau told eWEEK.

"They have been trying to transition their business from a hardware-centric model to an open-source software [model]-a difficult task given the economic times," Babineau said. "They are continuously reacting to market conditions with layoffs and other expense control items while trying to turn the ship. While they have had some success in building out some of their open storage platforms, the revenue is not material enough to spur growth to create enough shareholder value."

One option that no one is discussing, Babineau said, is the possibility of a "carve-out" in which IBM would buy a portion of Sun, and the balance of the company-most likely the software portion-would remain as a smaller entity.

"This would allow Sun to execute its strategy without the burden of the hardware legacy," Babineau said.

Veteran analyst David Hill of the Mesabi Group concurred.

"The proposed acquisition would be a blessing for all concerned," Hill told eWEEK. "The Sun sunset would be bright without having to go through the blackness of a possible bankruptcy.

"IBM, with its size and experience, is one of only a few companies that could absorb the disparate parts of Sun. So Sun stockholders and employees benefit, but so do Sun customers as well. IBM benefits as it gains the IP [intellectual property] and customer base and strengthens its competitive position. Moreover, the whole IT community benefits, as Sun has been a major contributor to IT innovation and it would be a shame if all its ongoing good work were to die."

Finally, it hasn't been a good week for HP and Dell and the Japanese systems makers such as Hitachi, Fujitsu and NEC.

On March 16, networking king of the hill Cisco Systems announced its move into the data center systems business; two days later, IBM and Sun are talking about becoming family.

The IT business world certainly doesn't become easier-or simpler-every day.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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