Original URL: http://www.theregister.co.uk/2003/05/23/analyst_three_men_at_airport/

Analyst, three men at airport to acquire Sun

Speculation on demand

By Ashlee Vance

Posted in Servers, 23rd May 2003 20:30 GMT

Three middle-aged men were waiting at the SFO baggage claim, when one asked, "So, who's going to buy Sun?"

This felt like a set-up for a mediocre IT joke, but The Register was intrigued and moved closer to the gentlemen.

"I guess it would be IBM, HP or Dell," one man said. "That McNealy has been spouting off for years, and it looks like his time has come."

The men had bought the pitch fed to them by the press. Giga analyst Rob Enderle told a few news outlets that an acquisition of Sun could make sense. Articles quoting Enderle cropped up all over the place and stirred up investors and Sun afficionados.

The problem is that while Enderle is a nice fellow and an industry veteran, he's not typically the first guy you would call to confirm a hard-hitting takeover piece. Enderle is known affectionately to some journalists as Dial-A-Quote for his readiness to be quoted on everything from the handheld to the mainframe and because he always answers his phone. He's not thought of as an oracle for the financial world.

Still, some reporters rushed to repeat Enderle's unfounded speculation on Sun with a host of similar articles. All would start by listing IBM, HP and Dell as potential buyers and then proceed to explain why such pairings could never happen.

Suitors

Let's start with the obvious. HP would not dare add Sun to its list of mega-acquisitions. Bringing the lost souls of Compaq into the fold is more than enough fun, thank you. A number of philosophical differences including what high end chip to choose and whether or not a vendor should sell its own middleare make the prospect of a HP/Sun merger laughable.

Dell is just as unlikely. Asking Dell to admit that a fraction of its sales come from Solaris boxes is like trying to get blood out of a stone. Michael Dell would hire IBM's entire engineering staff before he got up on a stage to laud a proprietary Unix.

With IBM, a glimmer of sanity appears. Big Blue has no issues with making large acquisitions and would knock off an annoying competitor by snagging Sun. Still, it doesn't add up.

IBM's hardware business is hurting as much as the next guy's. Why bring in more hard-to-sell big iron with the economy still limping? IBM's software business is stronger and the same is true with storage. It's easier for IBM to try and wait Sun out, leaving a two horse race with HP.

Does any deal make sense?

The gentlemen at the airport reached more or less the same conclusions and took their debate to a more enlightened level. Despite the drone of security warnings, the words EMC and Fujitsu were audible.

Wouldn't EMC and Sun make a nice fit? The companies are comparable in size and have complementary product lines. Sun's the Unix server market share champ, and EMC tops the charts in high-end storage. Both companies are developing advanced multivendor management software but, as of yet, their products do not overlap. Sun could chip in with its server software and link up with EMC's storage management code.

A deal with EMC would require Sun to stomach some Microsoft business, but that might be a well-timed shift.

Fujitsu has worked to expand its hardware business over the last few years, in particular, with a large scale marketing campaign in the U.S. and Canada. The company already sells Sparc/Solaris servers just like Sun and would gain a massive surge in market share.

Some say Fujitsu does Sparc/Solaris better than Sun, which would only serve to make a combined product line even stronger against IBM, HP and Dell.

Both EMC and Fujitsu seem like more rational fits, but now we are speculating.

Hard sell

Truth be told, an acquisition of any sort does not seem likely. We've kept a close eye on McNealy and have trouble believing he has any intention of giving in just yet.

As the downturn hit, McNealy was rumored to have asked executives to commit long term or jump ship. One would expect the same maxim to hold for the big boss.

On a personal level, McNealy must be reticent to give into the big guys. His father - a top executive at American Motors Corp. - saw AMC lose out to Ford and GM.

The New York Times did a nice job of exploring possible takeover bids by investors but concluded this too is unlikely.

Most successful investors make their gains over the long-term, and that is what McNealy is banking on these days. Sun has prepped a host of advances for what it sees a the next-wave in networked computing, as billions upon billions of devices come alive on the Net. Should their prediction be correct, there's no reason Sun can't thrive again in its area of expertise.

Sun has more than its fair share of problems, but the higher-ups appear prepared to stay for the long haul.

A second mass exodus of Sun brass would certainly be cause for alarm and reason enough to demand the Enderle hotline. But until something major happens, it's better to leave the armchair corporate wrangling at the baggage claim. ®