Could an IBM-Sun Microsystems Deal Pass Antitrust Muster?

 
 
By Roy Mark  |  Posted 2009-03-18 Email Print this article Print
 
 
 
 
 
 
 

The rumor that IBM is willing to spend $6.5 billion to acquire Sun Microsystems raises potential antitrust questions about the enterprise server market, where both companies hold a dominant market share in servers running on the Unix operating system. Then come questions about the competitive future of the storage, middleware, Java and database sectors.

Rumors are nothing more than rumors, but that hasn't stopped the rampant speculation that has burned up the Internet since media reports March 18 broke the news that IBM may be in unconfirmed discussions to buy Sun Microsystems for $6.5 billion in cash. Phrases like "software monolith," "enterprise giant" and "high-tech juggernaut" have all been used to describe the result of an IBM purchase of Sun.

"Illegal," though, was not being bandied about until Ed Black, president and CEO of the trade group CCIA (Computer & Communications Industry Association) joined in the massive speculation over the possible deal between IBM and Sun.

"If this merger is announced, it will require careful, extensive review by antitrust authorities because of the wide range of tech products both companies now produce," Black said in a statement. "IBM and Sun have been fierce competitors for years. A merger would eliminate a key competitor, which affects choice and prices down the line on numerous IT products."

Black contends that an IBM-Sun merger would create serious antitrust questions for the server market, where both companies hold a dominant market share in servers running on the Unix operating system. Black also said the deal would have "implications" for the storage, middleware, Java and database sectors.

Click here to read about how an IBM acquisition of Sun could help the open-source community.

"In these economic times we need innovation," Black said. "A competitive marketplace boosts innovation. We do not need 'companies too big to fail' at the center of our critical digital infrastructure. The impact of such a deal on competition and the price consumers pay for tech products would be far-reaching and deserves careful review by antitrust authorities."

That would be familiar territory for mighty IBM, a longtime target of antitrust officials and rivals in the United States and overseas. In 1969, IBM was hit by an antitrust lawsuit by the Department of Justice claiming the company was attempting to monopolize the business computing market. The case was eventually settled in 1983.

IBM is currently facing an antitrust investigation in Europe over its mainframe business practices, and the company bought PSI (Platform Solutions) to end several antitrust lawsuits involving IBM's relationship with PSI. IBM also faces an antitrust investigation by the European Union after one of its still-standing mainframe competitors, T3 Technologies, filed a formal antitrust complaint against IBM in January.

"This potential merger has the attention of many tech companies and others who might wind up with fewer choices in computer services," Black said. "We expect it will be scrutinized by all who use tech products, and all who care about a competitive, innovative business environment and its role in the economy."

 
 
 
 
 
 
 
 
 
 
 

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