Is it a bad idea for IBM to buy Sun?

Stranger things have happened, but there are several reasons why IBM buying Sun Microsystems could, to borrow a phrase from former Sun Chief Executive Scott McNealy, be like two garbage trucks colliding in slow motion.

The Wall Street Journal reported that IBM is in talks to buy Sun for at least $6.5 billion in cash, which would amount to about $4 billion once Sun's cash and marketable securities are taken into account. On paper, the deal could make some sense: adding Sun's server market share would give IBM more clout in its competition with Hewlett-Packard, IBM would get some software and intellectual property assets, and that price would be a nice premium for Sun shareholders disappointed with the company's sliding stock price.

But given how directly Sun and IBM product lines overlap, there are no shortage of serious difficulties, too.

Hardware
Let's start with hardware. IBM already has four major server lines running a variety of operating systems--AIX, zOS, IBM i, Linux, and Windows--on three major processor families. IBM needs Sun's Sparc processor and Solaris operating systems like it needs a hole in its head. It took years for IBM to break down some walls among its various server fiefdoms, but even now it has to reckon with complicated, often overlapping product lines.

CNET News Poll

Should IBM buy Sun?
Big Blue reportedly is in talks to buy Sun Microsystems for $6.4 billion. Should it?

Yes. Sun's products complement IBM's.
Yes. Keep a few assets, and sell the rest as scraps.
No. There are too many product overlaps.
No. Sun brings too many problems.

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Granted, Sun has, in its current Niagara and future Rock processors, some great intellectual property and expertise in designing multithreaded processors designs that can juggle a lot of tasks at the same time. But IBM would either have to adapt that technology to its own Power processors, a process that would take years, or embrace Sparc chips in its own line.

IBM or Sun could sell or license the Sparc line to Fujitsu, which has a line of its own and a Sun partnership. But the fact that Sun hasn't done so on its own doesn't bode well for Fujitsu's enthusiasm for the idea, and buying Sun just to sell off one of its mainstay businesses erodes the market-share-grab rationale for the overall acquisition.

Sun also has a respectable line of x86 servers using chips from Intel and AMD. They aren't a quantum level above the competition, though, and IBM already has a lot of in-house expertise with heavy-hitting x86 servers.

In storage, Sun made a big bet by buying StorageTek for tape drives that compete directly with IBM products. IBM might be able to consolidate customers in that market, but it's not a big growth area. Potentially more interesting, though, is Sun's Thumper line of x86-based storage devices, which have shown some life.

Software
Software is another tough sell for the bean counters. IBM's embrace of Sun's Java helped cement its success on servers, but for Sun, Java is more about intellectual property, industry influence, and bragging rights than big money. IBM might well have "Java envy," as McNealy quipped in 2004, but it can console itself with having a much larger Java software business in WebSphere.

The open-source connection in general is stronger. Both Sun and IBM have a history of both proprietary and open-source software. IBM got an early edge through its embrace of the Linux operating system, support for the Apache server software, and founding of the Ecplise programming tool project, but Sun arguably has leapfrogged IBM with a more-open-than-thou philosophy under Jonathan Schwartz; Sun's open-source move now embraces its two biggest software assets, Solaris and Java.

More compelling for IBM perhaps is MySQL, an open-source database product widely used to power up-and-coming Web sites. IBM knows how to sell a database, but MySQL fits in a market where IBM's DB2 doesn't.

However, making money from open-source software is a challenge, even if it's a great way to appeal to developers and to needle Microsoft. So the appeal of Sun's software business is much less direct than something that would contribute to IBM's top and bottom lines.

Cloud computing, which combines hardware and software, is an area where Sun has some experience and some bruises; it announced a second attempt Wednesday to tackle the market for a general-purpose computing foundation that customers can pay for as needed. IBM has some experience in the area--including a history that extends to a cloud computing progenitor of decades past called time sharing--and overall, it's hard to imagine that IBM is unable to do this on its own.

Intangibles
Sun and IBM have different cultures that could prove difficult to integrate. Sun, based in Silicon Valley, is an engineering-centric, free-wheeling company willing to try many ideas and see which ones stick. IBM is more conservative and driven by business concerns. Its bold moves often take years to pan out. Both companies share a passion for research and development, but how they bring that to market differs greatly.

Sun employees looking at the company's troubles might well be happy to don blue Oxford shirts, at least figuratively. But it's not easy to reconcile different procedures for allocating resources, marketing products, assessing their success, and charting new directions. And IBM might well sidestep cultural mismatch issues by laying off thousands of Sun employees.

The closest parallel from recent history is Hewlett-Packard buying Compaq--the deal that McNealy said in 2002 was "a slow-motion collision of two garbage trucks." HP and Compaq had overlapping product lines, too, but fairly rapidly coalesced them, for example, by immediately displacing HP's x86 server line with Compaq's stronger line and by scrapping Compaq's Tru64 Unix. What's different about Sun and IBM is trying to figure out which Sun assets would emerge victorious over IBM's.

The fact that a company as large and rich as Sun could be had for $4 billion or so must appeal to IBM, which doubtless expects to emerge from the current economic problems as a consolidator, not as the consolidated. But the acquisition would have to be justified not so much as fleshing out IBM's already rich product portfolio, but rather on the basis of acquiring good engineers, a strong portfolio of intellectual property, a reasonable developer community, and one less competitor in the market.

[nervous_cat]

I worked at both Sun and IBM - the company cultures could not be more different. Most Sun engineers would probably quit anyway if IBM took over the company.

[joetesta70]

I wonder what Brontosaurus and T-Rex were thinking when they saw the fireball in the sky.

Replace T-Rex with IBM and Sun with Brontosaurus + skanky ponytail.

That's the scene I see.

[Len Bullard]

And go where? If ever there was a time to take concubines, it's now.

[rp69]

Would only make sense providing that IBM put dirt over AIX solutions bury it in the sand and consolidate on Sun. Although the cultures are different IBM has had a good history of keeping the spirit of organizations intact and did a good job with their integration of Lotus. Sun could definitely stabilize and widen their business interests with those of IBM wealth of clientele. Their technologies are both proprietary so there's not much difference there in terms of intellectual property protection. IBM could abandon Power and consolidate on Sparc, IBM would then leverage their fabs to further that technology in line with Fujitsu.

[sanjayb]

Maybe this would help IBM write better software. The RAD platform is buggy and slow. It's hard to imagine that it runs on Eclipse. I have heard that NetBeans is a lot better.

[dargon19888]

You don't want to get in to an eclipse vs netbeans discussion. Both have their strengths and weaknesses.
The big thing is that while eclipse is free, a lot of the issues with eclipse are fixed in RAD that is not free.

And yes, I have used both eclipse and netbeans.

[fearghail]

IBM is a bad word in a lot of households, I hope SUN stays SUN, IBM can take a long walk off of a short pier.

[Commander_Spock]

A "JavaOS" Anyone?

Cool!

http://www.itmweb.com/f031098.htm

http://news.cnet.com/2100-1001-230175.html&st.ne.fd.mdh.ni

http://www.operating-system.org/betriebssystem/_english/bs-javaos.htm

http://en.wikipedia.org/wiki/JavaOS

http://java.sun.com/developer/products/JavaOS/

[George_Marenco]

No, let them both be separate.

[zvonr]

@Len Bullard

They could go on and start a company based on Sun's open source software (fork java, opensolaris, mysql....)

[z3r0bit]

I think Apple is a better fit. Integrating Sun would solidify a non-existent enterprise unit at Apple. Sun has great engineers but horrible marketing. A combination of Mac OS X and Solaris would be a force to be reckoned with. Sun's storage offerings would fit in nicely with Apple's video offerings to create the perfect backend Final Cut Server ecosystem.

On the other hand Apple could also go after Yahoo to strengthen their MobileMe services or Telestream to bolster their video/media products.

[t8]

I actually agree with your comment.
It makes sense.

[z3r0bit]

Sparc engineers plus the pwrficient engineers that Apple picked up recently, ZFS + XSan, SunGrid Engine + Xgrid, webobjects + java, the various OSS projects that Sun and Apple are involved in the list goes on. Apple will bring back the creative freedom to the Sun culture, while Sun gives Apple enterprise credibility and experience + suppor know how and structure. Imagine Apple marketing genius + Sun engineering genius watch out Microsoft!!!

[GajaKannan]

I hoped Oracle made this move. Blogged about it 6 months ago at http://gajakannan.wordpress.com/2008/08/27/who-should-be-oracles-shopping-cart/

[kojacked]

Dead on z3r0bit. +1

This is the best idea I've heard in about 3 years. You're right, Sun would make a perfect fit product-wise, but probably a horrible fit culture-wise. I don't know if the Sun guys are used to a restrictive, lower paid environment. I think the Apple/Yahoo merger would have a considerably better culture fit.

[Howard999]

Sunw is no longer a Sunw. It is Java now.
I heard many ex-coworkers still in Sun, they are not a free thinking company any more. It became sweat shop like many other companies trying to survive in the competition. In addition to many open sources, server, cloud computing, Solairs, Java, Smart Engineers, etc. to be added into IBM portofolio. Most people forgot mentioning IBM will have a chance to step their foot on consumer markets by having Java on embedded devices and cell phones. IBM will have integrate whole line of business/consumer connections from cell phone to cloud computing. Forget about culture difference, under today's tough market where are these smart engineers would go. BTW, given past few years JAVA's grilling, many smart one either retired or fled away long time ago. i.e. Bill Joy, Josh Bloch (Java's mother), Eddy, Shoemaker..... The pony tail is the least smart one left to run (play defense by debating) on behalf of the company. He claimed he has one near death experience in his life. He tried to lead JAVA into that situation and doing it very well until big blue giant shows up today.

[idfubar]

I believe James Gosling is more commonly credited with being Java's parent...

[w0rdwarri0r]

In one word:

Yes

[kakphoto]

I haven't read the article yet, but Its a bad idea. Why give a bad company (IBM) a good product. First Digital closed, now someone want Sun to go away. How sad. Soon we'll be left with IBM and Microsoft. Oh joy. Just kiss our butts goodbye if that happens. We need a movement to shutdown IBM. They have ruined too many companies.

[TV James]

I bet the people at Microsoft who regularly pray are praying hard today that this deal goes through. IBM is the next decade's GM.

[dennisl59]

Microsoft is THIS decades GM. Thank You.

[t8]

Agreed.

Microsoft is an also ran when it comes to the Web.
All they have is momentum in Windows and Office, but their stuff is becoming less relevant by the day.

[Sevenfeet0]

It would be a sad end to what started at Stanford back in the 80s, but it's better than the company being cut to death to the point where it is not viable, kinda of like Apple in 1994-1996. Ironically, Sun was always seen as a savior of Apple back in those days. Now it's the other way around. Unless Apple really wants to buy their way into the enterprise, they don't need Sun to distract them from what they like doing...Macs, iPods and iPhones. For IBM, it's a chance to get Sun intellectual property and some customers they didn't have before on the cheap. Sun's customers would like this a lot for the short term but what about the long term? Sparc or POWER? Only one needs to live and I think that will likely be POWER. Solaris or AIX? In that case, we might see a merge or the two architectures into a mega-Unix. That would still take years to accomplish and would have to be supported on both architectures for a long time. As for enterprise software, the two parties can sort out which is better and kill the other.

But the author is right...IBM is trying to gird itself up for a resurgent HP. It's going to get interesting.

[dennisl59]

They are buying SUN to break it up and sell it parts, give the people a severance and finally put this company out of it's misery. It's been fun. Have a nice day. Thank You.

[gggg sssss]

seems my comment on IBM not selling them to the govt of China. AKA Lenovo, has been sensored. Wonder why? Is lenovo advertising on thsio page?

[RF373]

**IBM needs Sun's Sparc processor and Solaris operating systems like it needs a hole in its head.**

A call may be in order to B of A's Ken Lewis, whom thought the time was
right last year to buy up financial Titanics Countrywide and Merrill Lynch...
-- found a cool site; Balkingpoints ; awesome satellite camera view of earth

[mdsudan]

for 4B IBM ensured that they dont have to worry about one competitor in HW and Cloud offerings and as a side bonus one of Oracle's biggest platforms just choked. Looks a little pricey...look at it this way, they spend 20B in sales and marketing and their number crunchers would have said...with SUN gone you would save x$ and then some tools & technology absorption, customer acquisitions and optimizing SUN into the IBM execution would be nice and optimal.

I dont see this to be like the Rational or Lotus purchases. I would expect IBM to buy SUN and completely take the SUN brand out of it in 3 years.

Then it will be about Oracle - HP, MS - Cisco/DELL/EMC, SAP - IBM

Interestingly in this pairing MS - Cisco family will have 50B in cash alone. Whatever their products do - they make a lot of money.

[jlopezcnet]

As someone else mentioned earlier - I think its ironic that a little over 12 years ago Sun was seen as a savior and wanted to throw its cash around to buy Apple.

In this day and age, I see no reason for Apple to buy Sun. They don't need anything in Sun's portfolio: StarOffice, Java, Solaris, Sparq, hardware, software, etc. IBM does not need Sun nor does it need it's dying product line. IBM has a linux variant, they have their own database enterprise solutions, they have their own office suite... etc, etc

I think the best suitor for Sun would be HP. They have an enterprise portfolio and for years have been competitors to Sun in the mid to large size enterprise solutions. That is the only company remotely capable of benefiting from a Sun aquisition.

Novell could benefit as well but I doubt they have the resources to pull something like that off.

[Maccess]

This has nothing to do with products or even services. IBM is acquiring Sun for the

P-A-T-E-N-T-S

IBM has re-oriented itself into a service company, and what better way to defend its business than by building a defensive patents warchest. No, I don't think they're going to sue others like a patent troll, but they'll use the portfolio to prevent others from trolling their partners and customers.

In fact, I think they'll place most of those patents under an open license collection.