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Ballmer: IBM-Sun deal could help Microsoft

Microsoft CEO questions how IBM would handle Sun's many product lines

By Elizabeth Montalbano
March 19, 2009 12:00 PM ET

IDG News Service - A union between IBM and Sun Microsystems Inc. would give Microsoft Corp. a competitive advantage while IBM worked to incorporate Sun's copious assets into a combined company, Microsoft's Steve Ballmer said today.

"We have a lot of competition with IBM, and I don't think it will change strategically," he said during an appearance in New York. "I think it gives them a year or two where all they're doing is digesting it. I relish that year."

Ballmer commented on a possible IBM-Sun deal, reported by The Wall Street Journal on Wednesday, at the 2009 Media Summit during a keynote in which he responded to questions from BusinessWeek Editor in Chief Steve Adler.

Microsoft's CEO called a purchase by IBM a good "exit strategy" for Sun shareholders, but he questioned why IBM might want to purchase Sun. The company has a complex product portfolio that includes a range of hardware and software products, many of which overlap with IBM's existing portfolio.

"I think you pick up a lot of stuff when you buy Sun," Ballmer said. "I think you have to decide if you want everything."

Microsoft has long been a competitor of both companies, but less so with Sun as the company has floundered over the past several years. Microsoft and IBM compete on a range of business software products, including middleware, application development infrastructure, database technology, and collaboration and workgroup software.

Microsoft's most famous association with Sun is a bitter seven-year antitrust lawsuit over the Java software programming language. The two companies resolved the suit in April 2004, with Microsoft paying Sun $2 billion to license Java.

As for the possibility of more acquisitions in Microsoft's future, Ballmer said the company will likely make "10, 15 or 20" small acquisitions -- which he characterized as sub-$500 million and which he said don't necessarily even need his approval -- in the foreseeable future. But Microsoft will probably continue its traditional strategy to keep acquisitions under $1 billion for the same reason he thinks IBM will struggle with absorbing Sun -- big acquisitions are extremely complex, he said.

An exception to that rule: Microsoft's $44.6 billion bid to purchase Yahoo last year, which so far has been unsuccessful, was also on the discussion table.

Ballmer reiterated his stance that Microsoft is open to some kind of search deal but not a full acquisition. Though they have spoken on the phone, Ballmer said he has not met face-to-face with Yahoo's Carol Bartz to discuss such a deal since she took over as CEO in January.

"I'm sure when it's appropriate we'll have a chance to sit down and talk," Ballmer said. "I've known Carol for years. She's very straightforward, no question about it; she's very friendly, and when she makes up her mind, when she's ready, we'll have a real discussion [about a deal] because she is that kind of person."

Reprinted with permission from Story copyright 2014 International Data Group. All rights reserved.
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