Sun Would Boost IBM Server Business

 
 
By Jeffrey Burt  |  Posted 2009-03-18 Email Print this article Print
 
 
 
 
 
 
 

IBM would gain little in server hardware if it bought Sun, but analysts said there would be several benefits. IBM would capture Sun's customer base, both in the high end and in the x86 space. In addition, getting Sun's server business would bolster IBM's capabilities in such areas as Solaris and Java. It also would help IBM in the growing data center competition with the likes of HP and Cisco.

Should IBM follow through on the rumored $6.5 billion deal for Sun Microsystems, server executives at Big Blue will have their hands full sorting through Sun's hardware business to see what is worth keeping and what should be let go.

IBM and Sun play in a lot of the same areas of the server business, from the high end with the Power and SPARC systems to the x86 space. These systems also touch on a host of other areas that will need to be taken into account, from services to software to processors.

Analysts said that, overall, the idea of IBM buying Sun makes sense, given recent moves by such competitors in the data center as Cisco Systems, with the announcement March 16 of its Unified Computing System initiative, and Hewlett-Packard, with its $13.9 billion EDS acquisition last year and its push to combine its data center and networking capabilities. Buying Sun would help IBM keep its leadership foothold in a part of the industry that is undergoing a lot of consolidation and change.

"There's a huge land grab going on right now in the data center," said Phil Hochmuth, an analyst with The Yankee Group. "It's coming down to a battle over who's going to build the super data centers of the future that enterprises are looking for. ... It's all moving to virtualization [and] a cloud-based strategy in the data center, and that is where all these companies are going."

For more on the possible IBM/Sun deal, click here. 

Given that scenario, IBM's interest in Sun makes sense, Hochmuth said.

If it does buy Sun, IBM is going to be getting a server business that has been struggling for almost a decade, when businesses started moving away from large, expensive high-end systems to smaller and less-expensive x86 servers.

IBM and HP dominate a server market that, like most other aspects of the IT industry, is being hammered by the global recession. In the fourth-quarter 2008, IBM held a 33.4 percent share of the worldwide $13.1 billion server market; HP had 30 percent, according to research firm Gartner.

Sun was in fourth-Dell was third-with 9.6, and saw a 14.9 percent decline in revenue over the same quarter in 2007.

Most analysts expect that IBM would get rid of Sun's high-end SPARC server business, most likely by selling it to Fujitsu, which with Sun already jointly offers a line of SPARC-based servers.

"I could see IBM selling off that server business, probably to Fujitsu, which relies heavily on Sun for servers," said Josh Farina, an analyst with Technology Business Research.

However, while IBM probably would get rid of the high-end SPARC business, having those customers in-house would be a boon for Big Blue, said Yankee Group's Hochmuth. It would increase the reach of IBM's massive Global Services group, not only by having those customers to support, but also by offering services that enable the customers to migrate to IBM's Power systems.

Joe Clabby, an analyst with Clabby Analytics, agreed.

"The secret is in how much business IBM does in Global Services supporting Sun customers in enterprise situations," Clabby said. "Sun has typically passed that off to -partners,' but IBM has a huge stake in supporting those companies. This is a good, continuing support revenue situation for IBM." 



 
 
 
 
 
 
 
 
 
 
 

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