Sun has decided to purchase Storage Tech, a purveyor of storage and back up solutions to many large and medium size organizations. Sun’s stated goal for the acquisition was to strengthen its offerings in storage and data management, an area that is still growing and profitable, unlike its troubled server business. It will also gain access to the installed base of StorageTek customers, but I believe there is a deeper more compelling reason Sun is making this acquisition.
As Sun looks at the landscape around it, it discovers that its biggest threat is not from IBM or even HP (though they clearly are major competitors). The biggest threat is the Dell juggernaut attacking their installed base of mid-size servers, both with Windows and increasingly with Linux based systems. However, Dell has a relatively soft side when it comes to storage. Although it does sell tons of storage on its systems, it is not seen as a major storage player for large corporate data centers (like an IBM, HP or even an EMC), at least not yet. Clearly a preemptive strike by Sun to prevent Dell from capturing arguably the most relevant remaining independent large player in storage is a good move.
Further, since EMC bought Data General, it has had a vehicle for selling servers to its installed base, many based on Unix but increasingly Linux as well. This has had an impact on Sun’s ability to sell against EMC.
So, by buying StorageTek, it will accomplish several things. First, it gets an installed base of companies that it can sell to, along with an increased sales force it can potentially leverage. More importantly it gains a competitive edge against its greatest nemesis, Dell. Finally, it gains an important equalizing factor as it tries to sell against IBM, HP and even EMC, as many companies try
to simplify purchases by buying total solutions from fewer or even a single vendor.
Bottom Line: while this move buys Sun some needed leverage, it is unlikely to ultimately change the bleak picture for Sun. Sun is in a similar position that Digital Equipment was in before being purchased by Compaq, and then Compaq’s position before being acquired by HP. Ultimately Sun can’t survive as a Solaris HW vendor.
Iron is growing increasingly commoditized, and Sun’s overhead is just too high to compete with the WalMart equivalent of the computer industry, nor are customers inclined to be locked into Solaris, increasingly preferring Linux instead. More likely is that Sun will continue its downward spiral, albeit somewhat slowed by this acquisition. I don’t expect its limited forays into SW to bear anymajor fruit or alter its ultimate fate.
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