Sun + IBM: Economics Making the Impossible Possible - Page 2

Rob Enderle

Other Buyers?


Four other parties could be interested in Sun.


HP, which would rather IBM not get the customer base that now belongs to Sun, would likely have the most difficult time justifying the acquisition because much of the value is in software, and that currently is counter-strategic to HP in that much of that is positioned against Microsoft (a close HP partner).


Microsoft has the resources and probably is even more interested in keeping Sun out of IBM's hands, but doing an acquisition like this would be difficult to get through regulatory approval and it clearly doesn't want the hardware.


Lenovo would really like to have the channel and market presence that Sun still has in the world. It wants to develop a server business and this would be one of the fastest ways. However, it hasn't been able to move quickly enough on opportunities like this in the past and appeared to be at least a year off from being ready to take on something of this size.


HP and Microsoft: A joint acquisition between HP and Microsoft could be very interesting, but nasty to execute. In this case, Microsoft would block IBM and access to the IP, while HP would get the products and customer base. If the separation were done right, regulatory approval is much more likely than with a Microsoft solo bid.


Doing the Merger


This merger, regardless of who does it, will have the problem of acquiring an employee base that has been pounded through sequential layoffs over the years and likely has no great confidence in management, any management, as a result. On the other hand, if many of these folks could have found other jobs, they would have. The areas to keep are those that are customer facing, or anyone tied directly to the technology that the acquiring company wants. Everyone else is at risk and likely will both know that very quickly and not be particularly happy about it. The merger will need to be executed incredibly quickly, otherwise employee problems could escalate to unacceptable levels and damage the acquiring company. Given the arms' length issues surrounding making the legal parts of this merger come about, doing a merger like this fast enough is problematic.


Wrapping Up: Final Thoughts and Recommendations


This showcases Sam Palmisano's excellent execution as much as anything. The fact that IBM can even think of doing this and was able to move on the opportunity so quickly showcases the changes he has brought about and the improvements he has made.


Sun customers: You have two choices. Either freeze your Sun (hardware) purchase projects until this settles or renegotiate them, taking into account the very real risk that this same hardware will become much less expensive after the acquisition until any inventory is used up. Support shouldn't be an issue -- it's avoiding the impression that had you waited you could have either negotiated a better deal or should have bought a different vendor's product. This is a time when folks tend to be a bit unforgiving of seemingly bad financial decisions, so cover your backside, as this class of hardware isn't cheap.

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