If IBM should end up buying Sun Microsystems, a scenario given new credence this week, loyal Sun shops may have lots to lose.
Skepticism ran high, but initial forecast of the post-deal impact on Sun customers was not rosy.
"If you're a Sun shop, this is not a good marriage," said Gary Poinke, a senior infrastructure engineer at a large Midwestern candymaker. "Sun is a stellar vendor on the storage and Unix side, I would hate to see IBM get a hold of that and bastardize it."Poinke added that most Sun shops refer to their servers as "Barney" for their purple color. "They're a hugely loyal customer base," he said.
Other users, including an Iowa-based Unix administrator, worried about less competition if the two rivals merge. Since Sun's Solaris/Sparc operating system/chip combination competes with IBM's AIX/Power 6 duo, users like him think IBM will be able to raise prices.
The administrator who now supports Sun hardware running Solaris but has worked with AIX, said his current employer went with Sun over IBM. "The primary reason we are currently a Sun shop was due to the initial cost and pricing of Sun products over IBM. … This should be interesting."
Many see Sun as a company that creates superior technology, that it is unable to market effectively, and which often loses out to less-worthy rival offerings.
Chris Dunbar, owner of Boston-based IT services company EarthSide LLC, uses Sun Fire x4150 servers, Open Solaris and ZFS. He said his initial reaction to news of a possible deal was sadness.
"I have always liked Sun and their many innovative products. Unfortunately they do have a reputation as the company where great products go to die," Dunbar said. "Sun has never been good at marketing, whether it was an internally developed product or something they acquired."
An acquisition would raise a slew of questions. Would IBM continue to support both the Sun Sparc chip and its own Power line? Would IBM continue development on the Sun Solaris (and OpenSolaris) operating systems? Could the converged companies meld their respective cloud computing strategies?Sparc unplugged?
Gordon Haff, the principal IT adviser at Illuminata Inc., a Nashua, N.H.-based consulting firm, said if the buyout happens, "Sparc ends sooner rather than later."
"IBM has put doubt [about its Power chip] to rest by doing a good job with the product lines," he said. "Would IBM realistically continue Sparc development in any significant way? No. I'd see that gone in short order."Another IT source who declined to be identified seconded that sentiment. IBM would get rid of Sparc and convert those users to Power. "Maybe they'd adapt Solaris to run on Power -- who knows?" he said.
IBM and Sun are both pushing an aggressive cloud strategy. Just yesterday, Sun talked up new cloud services. Those efforts could converge, observers said. Given Sun's shaky financial picture, its unclear how many companies would bet on the company's technology at this point.Sun customers -- Sparc servers and Solaris remain strong in financial services and telecommunications -- are famously loyal, as are its VAR and integration partners. But even large Sun accounts have grown concerned about the company's viability. One large New York financial services firm that is a big Sun hardware customer has actively weighed migration to other vendors because upper management is unsure about Sun's future, according to one IT manager. "There were bets here about IBM buying Sun," he said. This source said IBM's financial backing could prevent or forestall enterprise defections, at least initially. "If IBM buys it, it's not going to trash Solaris," he said. In his view, Solaris is a more "malleable and flexible" operating system than IBM's menu-driven AIX.
Others agree that Solaris is the stronger of the two Unix operating systems, but wonder if IBM would sustain it. "Solaris is a great Unix operating system and still well respected. I do not know if IBM values it at all, but I would hate to see it die," Dunbar said.
The CIO for a large credit agency that is a big IBM client but also uses Sun and Hewlett-Packard hardware is acutely interested in the proceedings. "I see the possibility of a bidding war breaking out over this," he said. "I think that HP will not want to let that storage business go to IBM and may want to get a foothold in Java and some other areas - --such as MySQL and other open source technologies that IBM covets. I think we may see more on this before a deal is done."Making sense of the deal
Dana Gardner, an analyst at Inter-Arbor Solutions, said the WSJ report smacks of a leak from the Sun camp. "It makes no sense for IBM to buy Sun now," he said. "If it had any real interest, it would have acted long ago on Sun's merits or six months ago on its demerits when it could have [bought] it for very little. My theory is Sun wanted this out to prop up its stock or is in talks with another party and is using this to drive up its price."
There is overlap in storage and in Unix servers between the companies, observers said. On the positive side, Sun would be relatively cheap, and Sun and IBM share a strong Java focus. IBM could reap the benefit of a large cadre of devoted Sun developers, Illuminata's Haff said.Assuming a purchase price of $6.5 billion, IBM would get Sun's $2.6 billion in cash and $1.2 billion in debt, said Jeff Matthews, a general partner at Ram Partners LLP. That puts the real dollar cost in the $5 billion arena. A $6.5 billion deal would represent a 100% premium over Sun's share price Tuesday of just under $4.97.
Still, Haff remains unconvinced of true merits of an IBM acquisition. "If it were to happen, I wouldn't say it was the dumbest acquisition I've ever seen," Haff said. "But it certainly isn't something I looked at and thought, 'OK that makes sense.' If I were betting on it, it's possible, but unlikely."
Barbara Darrow, Jo Maitland, Colin Steele, Mark Fontecchio and Bridget Botelho contributed to this report.
This report was updated Friday with additional user comment.
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