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Outcome of acquisition talks uncertain for IBM, Sun — and customers

The two server rivals are reportedly in acquisition talks. A deal may be good for them, but it raises questions for Sun shops.

By Patrick Thibodeau
March 23, 2009 12:00 PM ET

Computerworld - An acquisition of Sun Microsystems Inc. by IBM might have its good points, especially for Sun's long-suffering shareholders. But IT users and analysts have concerns about the prospective deal that can be summed up in two words: uncertainty and fear.

While Sun is a diminished company these days, it remains influential, thanks largely to its open-source products and the massive development communities that have built up around them — Java and MySQL in particular.

Now, with IBM and Sun reportedly engaged in acquisition talks, there are questions about what IBM might do with those technologies.

For instance, the potential deal got mixed reviews from Java users last week. On the Javalobby developer site, forum posts voiced worries that IBM would favor its own software products at the expense of Sun's.

There's also the issue of community relations. In Philadelphia alone, the local Java user group has more than 1,200 members. David Fecak, president of the decade-old group, said he and other members of the Java community like the democratic process that Sun has put in place to guide the technology's direction.

If a takeover does occur, Fecak wondered, would IBM continue to let the Java community operate as it does now — or would it move decision-making "underground" and take "the community process away from the community"?

Gordon Haff, an analyst at Illuminata Inc., sees an inherent conflict between Sun's open-source ethos and what he thinks is IBM's continuing proprietary direction. Although IBM has been a big supporter of Linux, its embrace of the open-source operating system "is in the context of what serves IBM," Haff said.

Setting Sun?

  • Sun lost $209 million in its fiscal second quarter, which ended in December, and $1.7 million in the previous three months.
  • Revenue declined 11% year to year in Q2, with product sales falling by 14%.
  • The company is in the process of laying off up to 18% of its workforce, or as many as 6,000 employees.
  • Sun lost ground on server market share to IBM, HP and Dell during 2008, according to IDC.

Such leanings are even more pronounced in the database market, according to Haff. Buying Sun would give IBM MySQL, the open-source database that Sun itself acquired last year. But, Haff said, "IBM doesn't push open-source databases. They push DB2."

Other observers, though, think that IBM is likely to be more interested in software technologies like Java and MySQL — the latter of which is used by Google, Yahoo and a host of Web 2.0 companies — than it is in Sun's hardware products.

Sun is still a major server vendor with a considerable installed base that no doubt would be attractive to a rival like IBM. Market research firm IDC says Sun sold nearly $1.3 billion worth of servers in last year's fourth quarter, leaving it No. 4 in worldwide market share.

However, Sun's line of servers based on its own Sparc processors and Solaris operating system could face an uncertain path under IBM, which sells systems built around its Power processors and AIX software that compete directly with the Sun machines. Whether IBM would want to maintain Sun's x86-based systems in addition to its own is another open question.

IBM could shut down or try to sell off Sun's Sparc business, but it would risk losing customers such as Daniel Grim, executive director of networks and systems at the University of Delaware in Newark.

Grim, a longtime Sun user, has been adding more Sparc systems to run the university's PeopleSoft applications. He foresees a long-term shift away from that technology, but he said Sun's x86-based hardware is an appealing platform for Solaris. "We like the designs, and we like the price," Grim said, adding that Sun's offerings tend to be significantly less expensive than rival x86-based systems from other vendors.

In addition to the technology issues that would result from an acquisition, Sun's corporate culture could pose challenges for IBM.

"Sun is a company that has been based on and driven by the work of mavericks," said Charles King, an analyst at Pund-IT Inc. "It's critical for IBM to somehow maintain the culture of Sun in a way that preserves that history of innovation."

The problem for Sun has been translating that culture into a viable business model at a time when selling Unix servers is no longer enough. It hasn't been able to wring much money out of technologies like Java and MySQL; IBM might be better suited to do so, but at what cost to users?

The IDG News Service contributed to this report.

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