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.”
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.”
IBM Would Get a Platform of Servers Running Solaris
In addition, gaining Sun’s high-end server business-as well as the x86 systems-would give IBM a platform of servers that run Solaris, which would be a big advantage, said IDC analyst Vernon Turner.
IBM would also benefit from gaining Sun’s SPARC chip development work, particularly with Sun’s CMT (Chip Multithreading) technology, said Farina, of Technology Business Research.
“[With its Power Architecture], IBM has focused on getting the clock speed up,” he said. “But with Sun, they’re more focused on thread levels and increasing the throughput. … There’s enough differentiation [in the chip technologies] one wouldn’t cannibalize the other.”
Sun also has a push under way to integrate solid-state disk memory throughout its server and storage lineups.
In the x86 server space, most analysts said IBM probably would simply absorb Sun’s business into its own Series x line.
Clabby said there is little in Sun’s server arsenal that IBM would keep.
“As for the technology advantage by assuming Sun’s hardware-practically nil,” he said.
But IDC’s Turner said that the value of Sun’s server business is less the hardware than what it brings with it, such as the customers and the integration with such technologies as Java and Solaris.
He also pointed out that Sun has a particular strength in the telecommunications space, which will continue to grow in prominence as vendors like IBM and others continue to push the idea of a “connected planet.” Having those customers in-house will be valuable to IBM.
“There’s a lot to keep,” he said. “Sun has a lot of core technologies that are important to a lot of enterprises, and there are a lot of synergies between those two companies, particularly [regarding] open-source [initiatives].”