What happens next at Sun Microsystems now that it appears that the long-expected acquisition of Sun by IBM appears to have fallen through is uncertain. And that uncertainty could be a major customer concern if Sun doesn't quickly outline the next steps forward, some of the vendor's solution providers said Monday. IBM and Sun have been discussing the acquisition of Sun by IBM for between $6 billion and $7 billion. Until late last week, it looked as if the acquisition was a done deal when Sun agreed to accept a slightly lower price in exchange for promises by IBM that it would not pull out of the deal in the face of antiregulatory concerns. However, on Sunday it was reported by The Wall Street Journal and Bloomberg.com that Sun may pulling out of the deal because IBM is hesitating to provide such a promise. Such a move could have a negative impact on Sun due to not only the uncertainty caused by the question of whether there will be a deal or not, but also by the uncertainty surrounding the question of why Sun was shopping itself in the first place, said Zeki Yasar, enterprise consultant at ePlus, a Herndon, Va.-based solution provider and Sun partner. "This creates concerns in Sun's customer base," Yasar said. "Customers might ask, 'Is there a problem with Sun that it was shopping itself around? What happens to Sun's products? What happens to SPARC?' It creates uncertainty, and lengthens the sales cycle." The question of uncertainties is a valid one, said Jim Guinn, executive vice president of the solutions division of Partners Consulting, a Buena Park, Calif.-based solution provider. "These are questions that can be asked, and Sun's management has to answer them," Guinn said. "But there have been rumors of Sun getting acquired for years. The reality today is that there are a lot of mergers and acquisitions. You have to always be open to discussions." Unfortunately, the media tends to pick up on discussions, turning them into news stories that generate a lot of speculation, Guinn said. "There are lots of reasons to merge," he said. "But people focus on the negative. Are there technology problems? Is the company slow to innovate? Is there board in-fighting? The fact is, Sun is an innovative company. But the question is, does it better serve its customers if it merges with another company?" Guinn contends that it does. "If the acquisition goes through, it would be great for both organizations," he said. "It would bring Sun's innovation to Big Blue, which is very methodical about innovation. But at the same time, IBM brings a proven track record of bringing products to market. If Sun had IBM's growth track record, and if IBM had Sun's innovation, it would be great for both." If the IBM/Sun merger talks have indeed broken down, Sun has four options, according to solution providers and other industry observers. First, Sun can keep talking to IBM to finalize the deal, a solid possibility because any disagreements at this point could merely be posturing on both sides to get the best deal possible. Second, Sun could look for other suitors. Hewlett-Packard, Oracle, HP and Oracle together, or Cisco Systems have been mentioned as showing interest in acquiring Sun. Third, Sun could look to split itself into two or more organizations, any one or more of which could be sold off. Fourth, Sun could just decide to go it alone as a stand-alone company, an option that looks difficult given Sun's recent financial situation but one that has served the company well in the past. The key, for now, is to ensure that customers focus on their business and not on any rumors, solution providers said. The reported collapse of the merger talks should not make much difference to customers and the channel, said Tony McGary, storage product specialist at Dewpoint, a Lansing, Mich.-based solution provider and Sun partner. "Everyone out there has heard the rumors, and [they] don't know if it's good or bad," McGary said. "Until a firm deal is on the table, there's not much difference. I don't get questions from customers about whether it's good or bad for them." Guinn said that he has spoken to a few of his company's Fortune 200 enterprise customers about the talks, and said that even if the deal was closed tomorrow, it could take years to have an impact. "If a customer needs business innovation, it needs to follow through on it now," he said. "Even if the deal goes through, it will take 10 months to get done. And with all the product road maps, there won't be a lot of change for years. So if there's a business reason to purchase products, it's better to do it now." For an idea of how this works, Guinn said to look at Oracle's 2004 acquisition of PeopleSoft. "There are still customers depending on software and new technology from PeopleSoft," he said. Neither IBM nor Sun responded to requests for further information. However, Reuters reported Monday that Sun said in a statement that, while it is not commenting on the question of the potential acquisition, it does stand behind its leadership team. See original article on CRN.com
Issue: 277 | March, 2010