Will IBM Use Sun to Counter Client Computing Competitors?

Less than a week after Cisco (CSCO) delivered on their announced intent to get deeper into the cloud computing space with their own line of servers, IBM is said to be in serious talks to acquire Sun Microsystems (JAVA). This is just one of what should be many moves to consolidate positions to address the “Compute 2.0″ opportunity that blurs the lines between servers, networks, storage and devices.

Sun has blundered its way to only a 10% market share in servers but it will help put IBM firmly in the #1 spot ahead of a surging HP (HPQ). It makes it clear that IBM is going to take this battle seriously, and Cisco may be surprised how competitive the old Big Blue can be if you come into their living room. The hardware, though, is not what interests us the most.

Sun would bring IBM some very strategic software assets. Java occupies a key role in enterprise computing and some open source products like MySQL are king in the more open general Internet space. Sun has many software product lines, but for something to matter in the context of IBM, it has to be bigger than most of these.

If the deal goes through, we will be especially interested in what IBM will do with StarOffice (an equal to Microsoft (MSFT) Office on Linux). Linux on the desktop has yet to catch on in any mainstream way, but has seen some pockets of success with individuals and government organizations in Europe. In the hands of IBM, it might be a very different story and a very unpleasant outcome for Microsoft.

The potential deal would make it clear that IBM will not sit back and watch Cisco gain share in the server space, but we don’t yet know if part of this is to counter growing client computing influence from Google (GOOG) and Apple (AAPL) and the ability for Microsoft to rebuild itself on the back of Windows 7.

If IBM does take the initiative with OpenOffice, they will again occupy a prominent space in the client computing space, at least on the software side. With no personal computers or mobile devices, they may be feeling that they have to do something to prevent Google and Apple from putting down roots in the client and mobile computing spaces.

Comments

[Roger Knights:]

If IBM ever made a deal to sell the mac worldwide to its customers, and Apple agreed to include enterprise features in its OS X, ... WOW!

As for StarOffice being the equal of MSFT's Office: Nope.

Mar 18 11:53 AM

[MichaelAK:]

What is not being addressed is the anit-trust issues to such an acquisition. Sun and IBM (previous anit-trust issues) might peak the interest of the new admin DOJ to review along with EU. Given the potential lose of jobs not sure if the new admin would force IBM to make some concessions or block the acq. Especially, given the size of IBM growing software presence.

The bankers love the acq but seldom do the synenergies emerge, especially in technology. Guess would be interesting if Cisco would jump in to help with their new server initiative. Also how much talent (of what is left at SUN) will leave.

Also how does opensource fit into IBM when that could hurt their own DB2, IFMX, Lotus, etc.

Mar 18 12:52 PM

[Thomas J. G...:]

I don't know why everyone is obsessed with StarOffice. IBM has Lotus, why would they do anything with staroffice? Microsoft won the desktop tools contest for any group of customers that matters, and until whole new devices come out that make Microsofts desktop tools obsolete that isn't going to change.

Mar 18 01:03 PM

[Raution:]

This is again one of the permutations and combinations in the tech industry. We have seen it in the past and expected to have few more in future. But the million dollar question as stated in the article above is the effect of this acquisition and the benefits to IBM. On either front I see little value added. Though it might help IBM as a company to grow its market share but the additional value creation is missing. As pointed out correctly by "MichaelAK" in comments section, that the deal might not even go through.
It will be interesting to watch a new saga of consolidation in tech industry.

Mar 18 01:50 PM

[Sentinel:]

Thomas Gordon above said....

" I don't know why everyone is obsessed with StarOffice. IBM has Lotus, why would they do anything with staroffice? Microsoft won the desktop tools contest for any group of customers that matters, and until whole new devices come out that make Microsofts desktop tools obsolete that isn't going to change. "

Not exactly true. After IBM dropped development of Lotus Smartsuite, they have begun development of a new open-sourced suite known as Lotus Symphony......which is nothing more than a gussied-up version of StarOffice or what is also known as OpenOffice (StarOffice is what you get when you buy support from Sun....OpenOffice is the free version with no support).

Now they will own the code lock stock and barrel....if the deal goes through. There will be some interesting ramifications particularly if IBM were to integrate Sun's JAVA more fully than even Sun has done in Symphony/StarOffice/Op... A full blown cloud version of this would be interesting.

Mar 18 02:59 PM

[Gregorian:]

Congrats.

It's three of my favourite IT-technologies (as an user...) that here will go together. Java, MySQL and IBM are all brands of quality and flexibility. I wish them the best of luck.

When it comes to the economics of this merger; don't ask me. But the timing is certainly better than it could have been in say, late 99'.

Cheers!

Mar 18 03:48 PM

[FreeRange:]

IBM is already heavily into open source software, and in fact is one of the key market leaders in the space, both in offerings, as well as in their consulting practice so it won't hurt their products at all, just compliment... also, there is plenty of competition in the server market so this should not be a major anti-trust issue although it will certainly come up.


On Mar 18 12:52 PM MichaelAK wrote:

> What is not being addressed is the anit-trust issues to such an acquisition.
> Sun and IBM (previous anit-trust issues) might peak the interest
> of the new admin DOJ to review along with EU. Given the potential
> lose of jobs not sure if the new admin would force IBM to make some
> concessions or block the acq. Especially, given the size of IBM growing
> software presence.
>
> The bankers love the acq but seldom do the synenergies emerge, especially
> in technology. Guess would be interesting if Cisco would jump in
> to help with their new server initiative. Also how much talent (of
> what is left at SUN) will leave.
>
> Also how does opensource fit into IBM when that could hurt their
> own DB2, IFMX, Lotus, etc.
>

Mar 18 06:47 PM

[brewer:]

Who know? Maybe IBM and Apple might want their respective (business and consumer) markets back from Microsoft? After all, it's not as if Microsoft is doing anything with them!

Mar 19 09:24 AM