IBM to cement server dominance with US$6.5 billion Sun acquisition

Stan Beer
Thursday, 19 March 2009 03:44

Opinion and Analysis

Computer hardware giant IBM is seeking to clear out from its rival server makers by acquiring the fast declining Sun Microsystems for about double its present market value. Sun is currently the number four server player, while IBM holds a narrow lead at the top over rival hardware monolith HP.

As the Wall Street Journal report on the acquisition talks between IBM and Sun pointed out, there are synergies between the two companies on both the hardware and software fronts.

In the hardware space, while rivals HP and Dell have focussed on cost, providing cheap Intel-based server technology, IBM and Sun have stuck to their traditional proprietary high performing non-Intel platforms.

There has been skepticism expressed about IBM's motives for buying Sun's troubled hardware business, with quite a few pundits pushing the view that the main benefit for IBM is simply taking a competitor off the market and getting its customers - a sort of hardware version of the Oracleacquisition of PeopleSoft.

In the software space, both Sun and IBM have been virulently anti-Microsoft for the past two decades and are both fervently pushing the Linux and open source software barrows.

IBM would be particularly well served by Sun's ownership and expertise in Java for web development and its increasingly popular open source alternative to Microsoft Office, Star Office - its branded version of Open Office.

It's hard to see this deal not going through provided IBM gets shareholder approval. With Sun's shareprice languishing, IBM has been tipped to pay about double the market value of the company and Sun, a company being increasingly marginalised, is a willing seller.