What with some of the confusing--make that idiotic--federal regulations governing corporate behavior that have appeared the last couple years, there's a near bottomless demand for big storage systems. After the passage of Sarbanes-Oxley and HIPAA, CEOs are so keen on covering their posteriors these days that there's no such thing as too much documentation. Identity and management access is the hot ticket these days as every management team worth its salt wants to tout how tough it now is on compliance.
So in theory at least, buying a company with more than $2 billion in sales could put Sun back on the growth path--especially considering its newly added heft in the $65 billion storage market.
Sun claims that 35 percent of the archived data on the planet is housed on StorageTek equipment. Throw in the some-odd 1,000 new sales representatives coming along with the deal and you've got the makings of quite a large enterprise storage company with deep data center expertise.
Maybe that's a wise gambit. There's not much upside in being known as a software company that gives away the code of its products for free. Critics say Sun's open-source moves seem like more of a come-on to get customers off its back than any real sales driver. So why not become more of a turnkey provider and simplify customers' lives? With StorageTek's products in its arsenal, Sun will now be able to market itself as a company that can offer credible server, networking and data management solutions. As McNealy put it, "Why does Ford do tires and windshields? Because it simplifies the problem for the customer in a big-time way."
Then the aura wears off and I'm back to wondering what I was smoking in the first place. Over the last several years, Sun often appeared to simply throw a lot of stuff at the wall and wait around to see what stuck. It's obviously not that slapdash, but the company still hasn't come up with a coherent message to excite customers--and by extension, Wall Street.
Sun still has to make a better case why investors should applaud a transaction that reduces the company's cash by 40 percent and may not do much to spike sales growth or profitability. (The folks at Prudential Equity Group said they would rather have seen Sun buy back a billion shares and fire 10,000 people!)
A while back, one analyst quipped that Sun functioned well as a bank but not so well as a computer company. If this megadeal fails to pan out, Sun won't even be able to claim that backhanded compliment.
Biography
Charles Cooper is CNET News.com's executive editor of commentary.
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What I don't understand is the vitriol that Mr. Cooper writes.
The acquisition of StorageTek is a smart move by Scott McNealy and Co. The gained revenue within the next three years (if not sooner) will surpass the purchase costs. And that same revenue exceeds what the $4 billion was earning on interest.
Sun Microsystems has new sales channels to explore, new customers who might pursue new Sun hardware/software solutions, and more hardware/systems firepower against aggressors like IBM and H-P.
If I were a Sun Microsystems shareholder, I would be confident that their management can execute on this acquisition. Sun is not an SGI, DEC or other high-tech casuality of the past decade. Sun suffers from an image crisis, particularly as a non-consumer type company when compared to Dell, Microsoft, H-P and others. The slow growth trends for Sun might have warranted the McNealy/Fiorina jab in the article. But McNealy isn't merely a scrapper, nor a survivor -- he's able to execute. He's a proven quantity within the industry. It's a matter of Sun expanding into new marketplaces and finding new customers. This acquisition is a blessing. Sun will be given yet more credibility a as a MicroSYSTEMS company.
Nice try, Mr. Cooper. Your article failed to convince me that this was a poor purchase decision, or that Sun's board of directors are doing drugs. That editorial "opinion" alone ("quaaludes" comment) shows how desperate you are to bolster your readership by hitting below the belt. I think the Sun will continue to rise. I'm saddened that C|NET considers you worthy of your editorial position with such obvious rancor against Sun Microsystems. Take your potshots against Intel, a company which failed to execute well under retiring CEO Craig Barrett's watch, despite their brand name and worldwide presence.
I think this purchase is one big confused act on the part of Sun. It doesn't know whether wants to be a software company or hardware company, and it doesn't have resources to become both.
E.G.,:
"(The folks at Prudential Equity Group said they would rather have seen Sun buy back a billion shares and fire 10,000 people!)"
Yeah, that would do Sun a lot of good. Why not just go all the way and liquidate the whole company.
'Storage' is what a company does just before everything goes dark.
This sure isn't a bold foray into the hearts and minds of consumers or snazzy developers.
I mean, come on, who develops applications for giant off-line databases except data miners.
And, as I've said before to my Computing brethren, "Data Mining is what a Computer Scientist does, just before everything goes dark."
Sun? First they spent 4 billion and get 1 billion back as soon as the deal closes so it is only a 3 billion net purchase. That leaves them with 4+ billion in the bank.
I think that the most important purchase Sun has made won't be this one, it will be the purchase of Kealia that brought Andy Bechtolsheim back. That was probably less than 5% of what this deal cost.
As with all prognosticating we will see.
As to the qualude comment I don't think dumping a CEO who has guided the company through very tough times as good as anyone could have is a bright idea. Yes the repeated forays into x86 cost a lot and didn't work out (yet) and the focus on services has been late in coming but hindsight is always 20/20.
I think Sun will make a comeback over the next 2 years and then Scott will retire and sail around with Bill Joy. Now if they can only fit an ice rink on that boat!!! :)
Coop's correct, failure in execution has to be blamed on Scott.
With regard to the storage business itself, Sun has had three prior failed attempts internally to kickstart this business.
Paragraph I starts with a rant about how government regulation has led to huge demand for large storage solutions. It ends with "Identity and management access is the hot ticket these days[http://...|http://...]." Sun's identity (java card) and management of access (ldap) solutions are widely regarded as superb; however, neither of these items is a storage solution nor has very much to do with the StorageTek acquisition. Very odd.
blah, blah, blah...
Oy! My head hurts. If this sloppy piece of incoherent butchery makes sense to you, then rejoice! Peace.
misstep... no body wanted 64bit... and i mean who needs a
heater when you have a p4 in your house.. come on...
I'm done giving money to Sun. We're selling off our entire Sun server farm and moving entirely to Dell x86 based stuff running Linux (probably Debian). Placing the wire transfer today.
I also run hundreds of Opteron SUN boxes running linux for parallel, and they just sing.
If SUN could just shed the "we're the cool guys in jeans and sneakers" attitude, they'd be able to compete. Unfortunately, they are still a bit more difficult to do business with than IBM or HP or Dell.
I, like the author, can't really see what buying StorageTek, an also-ran in storage, will do for SUN. SUN already has overpriced storage that is nothing special.
Good luck with Debian on Dell. Your headaches have just begun.