Sun Would Boost IBM Server Business (
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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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