Analysts' roundup: What in the world would IBM want with Sun?

While IBM would pick up more technology, products, users, and revenues, integrating the two companies might not be any picnic, and some Sun customers certainly wouldn't be happy campers, analysts told Betanews this week.

Industry observers have been pondering the possible ramifications ever since a Wall Street Journal report yesterday stating that the two OEM giants are in acquisition talks.

Even at $6.5 billion, the Sun price tag pinpointed by the WSJ, a merger between IBM and Sun could make sense from IBM's perspective on a lot of levels, according to analysts who spoke with Betanews this week.

"The deal would give IBM access to a much wider range of technology assets," said John Spooner, senior analyst, Technology Business Research (TBR). "IBM would do what IBM does. It would take the assets [from Sun], plug them into a broader set of products, add services, and monetize them."

Charles King, principal analyst at Pund-IT, noted that IBM's own services arm -- IBM Global Services -- accounts for more than 50 percent of IBM's yearly revenues.

"IBM takes a very heterogenous view of the data center -- and for years, it was one of Sun's largest resellers. As a result, IBM has a very deep insight into [Sun's products]," King remarked.

"IBM and Sun have worked together a lot, and their product portfolios are complementary, with a fair amount of differentiation," maintained Roger Kay, principal analyst at Endpoint Technologies. "Sun's IP [intellectual property] can be easily absorbed by IBM."

What IP from Sun would IBM crave most? "Java is the most obvious one that comes to mind," according to Kay.

King cited some other open source software technologies, too, such as Sun's OpenSolaris OS and MySQL database.

Jonathan Eunice, founder and principal IT advisor at Illuminata, put in additional votes for Sun's new open source cloud platform, rolled out earlier this week, and the Glassfish open source application server.

"Sun also has some very intriguing hardware technologies that Sun does not," according to King, who pointed to Sun's Niagara multi-threaded architecture and AMD Opteron-based Galaxy servers.

IBM could pick up a lot of new customers from Sun, too, the analysts agreed. "Sun has a huge footprint in three groups: financial services, telecom, and the public sector. This could be incredibly attractive to IBM," King noted.

But Spooner predicted that IBM would need to cope with some balky Sun customers. "Sun customers are Sun customers for very specific reasons," he told Betanews.

Maybe a customer has been drawn to Sun by a particular server, or some other favorite technology unavailable elsewhere, for instance. Spooner suggested that Big Blue might soothe Sun customers by providing them with product and technology roadmaps.

Illuminata's Eunice voiced a somewhat different perspective. "Some customers would be most unhappy [about an IBM buyout], while some of them would be very happy. Enterprise customers are very, very diverse," he observed.

But as a common thread, enterprises get cranky when vendors start making changes that impact their product investments, according to the Illuminata founder, who pointed back to customer resistance around Oracle's PeopleSoft and JD Edwards buyouts a few years ago.

Eunice cautioned that IBM might start phasing out Sun products in overlapping areas -- and those that are at "end of life" -- not that long after a merger.

"Integrating the two companies would also be painful," contended TBR's Spooner. Other analysts largely concurred, citing integration issues around technology as well as company organization and "culture."

Although both vendors are heavily involved in open source technology, their business models differ, Eunice said.

"Sun takes an 'everything shall be open' model, whereas IBM has a very hybrid view of open source. IBM is not supportive of open source middleware. It wants you to buy middleware from IBM. IBM wants you to pay for the IP," Eunice told Betanews.

Both OEMs are also "making big bets on virtualization and the data center. It's most of what they do," said King. "But there would be two Unix platforms [in a merger], and that would need to be sorted out."

As TBR's Spooner sees it, IBM might ease organizational issues by setting up Sun as a subsidiary -- initially, at least.

"The cultural issues are the most intriguing, and probably the most problematic," according to King. Still, though, the cultures of the two companies aren't really as different as stereotypes would indicate.

While some peg Sun with a "whacky California-style culture," Sun is "really a lot more pedestrian than that," King asserted. "There are even people at Sun who are capable of interacting in a business setting," he quipped.

And although IBM's culture still tends to be "East Coast and more traditional," it's nothing like "the blue suit, striped tie environment of ten years ago," according to King. "There are even people at IBM who don't look like they were born with their suits on."

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