Thursday, March 19, 2009

More Acquisitions...I'm Just Not Sure Why

The news yesterday was that there seems to be a $6.5 billion offer on the table for Sun to be bought by IBM. When I first heard this news yesterday I wondered what the motivation was for making the acquisition and how it would fit into the “new” IBM. Sun of course is on the front-line of open-source, they bring us java, mySQL and lots of servers and this is makes them a target. I understand that the reduction in their market value also make them a target but I need to understand why one would persue this type of acquisition.

I have been part of a few acquisitions in my time. Some go well and others end in failure. Generally the success of any acquisition is in the way that the you incorporate the companies values into your own. Realizing the reasons you bought someone in the first place. I look at Oracle and how it has acquired some many companies that complemented their own. They always tried to by best of breed products and have integrated their technologies very successfully into their own. Consider the acquisition of companies like Hyperion, BEA, Peoplesoft, Stellent, Sunopsis among others, that have truly changed the products that Oracle provides. And the IOUG has helped these communities become integrated into the greater Oracle technology communities.

So how does the IBM and Sun combination work out? Consolidation is very in these days, so this would be some sort of consolidation. We can be sure that they would love to increase the bottom-line and the Sun server business is significant and has a solid reputation. The acquisition of mySQL by Sun was questioned at the time of how a company with revenues at the time of $70 million can be worth $1 billion. It has provided Sun with a great low-end database and has continued its growth, so this is a big pick up fo IBM. As for applications; sure Sun has developed a few open source applications but I have yet to see it take hold. It does reduce IBM’s competitors and solidifies them in the hardware industry as well as bringing them up to the leader level in open source, and all for only $6.5 billion. It will be interesting to see where this goes and I wonder what IBM will look like in 6 months from now. I'm just not sure that I truly see the benefits that IBM will garner from this relationship.

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