Well I blogged back in 2004 about what a great acquisition Sun would be for IBM and then blogged recently about how well Sun's open source is doing, making Sun an even better acquisition for Sun.
Sun's market capitalization has been roughly equal to its cash position for years, so it is effectively worth $0. IBM's market capitalization less its cash position is 1x its revenue, so any revenue it gets increases its market cap by $1. So buying Sun at 2x its market cap is an ACCRETIVE acquisition for IBM!
What IBM gets:
- Sun's $600M in open source revenue from Java and MySQL are the crown jewels of this deal. IBM now gets to control the infrastructure language that most of its customers are running. They get to upsell MySQL customers to DB2. This is a dream come true for IBM.
- Sun's $6B in server revenue. IBM can make a SPARC to PowerPC microcode translator and kill Sun's entire server group. The customers can get upgraded machines that run faster than anything on Sun's roadmap. The small x86 server group can be immediately killed and customers transitioned to IBM's x series.
- Sun's $5B in service and professional services revenue and people get migrated directly into IBM Global Services.
- Solaris and StorageTek storage can be integrated into IBM's existing Unix and Storage groups and put into life support as customers get migrated to Linux and modern storage solutions. This is the same thing IBM is doing with AIX and its own legacy storage products.
- Everything else can be killed, including management, grid, etc. These are all nascent markets for Sun, and already strong markets for IBM.
All in all I think this is a good move for Sun and IBM, and Sun's customers. Sun has been slowly and successfully transitioning into an open source software company, and IBM is a great home for both Java and MySQL. IBM is an expert and maintaining and migrating customers from obsolete technologies, which it will be able to do for SPARC, Solaris, and StorageTek.
Goodbye, Sun, you will be missed.
- Peter Yared
- Peter Yared is the CTO/CIO of CBS Interactive, a top ten Internet destination, and was previously the founder and CEO of four enterprise infrastructure companies that were acquired by Sun, VMware, Webtrends and TigerLogic. Peter's software has powered brands from Fidelity to Home Depot to Lady Gaga. At Sun, Peter was the CTO of the Application Server Division and the CTO of the Liberty federated identity consortium. Peter is the inventor of several patents on core Internet infrastructure including federated single sign on and dynamic data requests. Peter began programming games and utilities at age 10, and started his career developing systems for government agencies. Peter regularly writes about technology trends for CNET and has also written for the Wall Street Journal, BusinessWeek, VentureBeat and AdWeek.
Many thanks to Bob Pulgino, Dave Prue, Steve Zocchi and Jean-Louis Gassée for mentoring me over the years.