IBM looking at Sun as acquisition target

According to reports in the Wall Street Journal today, IBM is considering acquiring Sun Microsystems for $6.5 billion. The competitors have long battled over the server market, and the acquisition could be a big coup for IBM on that front. At one time during the height of the dotcom boom, Sun was valued at $205 billion. In recent years, Sun has suffered financially, according to the Wall Street Journal report, because it relies mostly on selling higher-end systems, with the financial industry being a major focus.

Besides the server market, the deal would give IBM a bigger presence in open source. Sun's Java programming language is enormously popular. The acquisition would put IBM squarely in the forefront of the open source business--but at the same time, would also create an environment with incompatible hardware technologies. In addition, the corporate cultures are vastly different between the two companies, with Sun's management philosophy revolving around giving engineers a much greater range of freedom.

Is it a good idea for IBM? Maybe not. the hardware business is one of the slowest growing segments of technology there is, and the inevitable confusion may well push some customers to competitors like HP. IBM may be more interested in Sun's Java language and database software. The acquisition is by no means a done deal at this point though, and the Journal notes that Sun has also been in talks with others--and an acquisition by IBM would no doubt raise some antitrust concerns.

The deal would give IBM a big boost in the open source business though, and would give the company a chance to transform Sun's open source software products into profit centers. IBM does promote Linux, but does so in such a way as to create a framework for selling services that surround the open source system, something Sun hasn't been particularly good at.

The Sun reseller community is a bit "unsettled" on the whole issue, and even the rumors of acquisition by IBM may cause a lot of customers to put off buying Sun for the time being.

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