Shrinking Sun under the gun
Could Fujitsu unite?
Fujitsu, with $53bn in annual revenue, stands as one company that must be keeping a close eye on Sun's situation.
It already shares costs for producing SPARC chips and servers with Sun. So, Fujitsu knows the SPARC/Solaris business well, meaning that it's familiar with the needs tied to Sun's main product line.
A combined Fujitsu and Sun looks appealing on paper. You'd end up with a company that could really compete quite handily against the massive shops at IBM and HP on a global scale. Fujitsu could pick up some of the best-designed server and storage products going, while also broadening its software portfolio dramatically. Fujitsu would also gain a much stronger presence in the US, while the combined company would be even stronger in Europe (Fujitsu Siemens) and Asia.
In many ways, the companies might even mesh culturally, since Fujitsu still values research and development, continuing, for example, to work its mainframe expertise downstream by creating damn fine Unix boxes.
Sun has always been such an independent force that it would present major integration challenges for a company all the way across the ocean. But Fujitsu could be a nice lifeline. And since it has a market cap around $16bn, Sun and Fujitsu could kind of pitch a merger of equals, making everyone happy.
In addition, Japanese companies tend to shy away from hostile corporate takeovers, while US companies love some old-fashioned hostility. Sun may want to start making nice now with Fujitsu before it gets too late.
Frankly, talking about Sun being absorbed into another company makes us feel a bit ill. Sun has always been that counter-puncher that helps keep everyone else honest.
It's just that we watched Sun drop from Icarus heights to about a $24bn company. And then drop down to about an $18bn company. And now here we are at a $7bn company.
We'd figured that Sun's x86 line would grow larger faster than it has and that it would inject serious new life into the company. But, while the business has done well, it hasn't grown enough to support Sun's current structure, which is more or less based on the idea that the x86 sales would replace all the the lost Unix sales.
There are still a number of bets out there that could revitalize Sun. The Rock-based server family arrives in 2009. The MySQL purchase is only just taking hold. Developers seem very interested in OpenSolaris, and Sun has concocted a fresh take on storage, centering new gear around open source code and general purposes boxes. Meanwhile, its x86 systems really are just about the best Tier 1 gear you'll find on the market.
Some Sun investors have taken all this in and re-upped their faith in the company. Last month, for example, Southeastern Asset Management bought a massive chunk of Sun shares, raising its stake in the company to 10 per cent. Southeastern is behind the Longleaf Partners Fund, which prides itself on finding under-valued companies with solid management.
But at $7bn, you have to wonder if a vulnerable Sun can survive until this latest round of bets has a chance of hitting in late 2009. The woeful economy certainly does not help matters. Nor do recent rumors that Sun is seeking a replacement for CEO Jonathan Schwartz. After all, Schwartz was McNealy's hand-picked successor. If these two fellas can't figure out how to fix Sun, we're not sure who can.
We're pretty convinced that the outside world would see a massive "For Sale" sign in Schwartz's departure. "We tried out best boys. Now, who wants the good bits, and how much are you willing to pay?" ®