IBM and Sun: Slight of Hand or Twist of Fate?

Wow, what a week it's been for the server market...and it's still only Wednesday!

Most of us, by now, have seen the speculation regarding IBM acquiring Sun Microsystems. If the story is true, there are some serious implications for other vendors in the server market. If untrue, then let's just say the rumor served its purpose.

Cisco's entry into the server market, termed "Unified Computing System", which Burton Group has blogged about here [1, 2, 3, 4, 5], was perhaps the biggest news in the compute space for, well, years. But just as the buzz around Cisco's announcement reached a feverish pitch, a story regarding IBM potentially acquiring Sun appears in the Wall Street Journal, drawing attention away from Monday's announcement. Coincidence? Mmmmm....maybe. At the very least, these rumors are a nice side benefit for any server vendor other than Cisco. And, I suspect, IBM and Sun have/are discussing a deal, which gives each company "plausible deniability" that the story was leaked early to intentionally rain on Cisco's parade.

Be that as it may, if IBM does acquire Sun (it's hard to believe they won't at this point), here are some implications for the remaining server vendors.

• Dell. Dell is the big loser in this acquisition. Dell's lack of high-end compute products in its portfolio puts them at a disadvantage in many enterprise accounts. Large enterprises require more than x86 compute resources for some workloads. Because Dell doesn't offer high-end compute, they capture only a portion of the total IT budget, exposing them to competition. Also, the incomplete portfolio further reinforces Dell's poor enterprise brand credibility. Sun was the one company that could really help Dell in the enterprise. Sun had both the high-end compute products AND the enterprise brand credibility to raise Dell to an HP or IBM level (or at least put them on that path). With Sun off the map, who else is out there than can give Dell the boost they need? At this point for Dell, one has to start asking the question if Dell is better off being acquired than acquiring someone else. Burton Group blogged about Dell and Sun a few months ago.

• HP. For HP, the acquisition is more of a market share and software issue than hardware. Adding Sun's products and capabilities to IBM's portfolio is probably not a big deal from a hardware standpoint. HP already has competitive offerings to both Sun and IBM in many aspects. There are, however, some serious software implications for HP, such as identity management, virtualization, data base, open source, that help propel IBM forward beyond where HP can go today. But the mad scramble will be for Sun’s customers who are forced to choose between the hardware platforms and software IBM chooses to keep versus switching to HP. If IBM can execute crisply -- which they rarely do -- then HP may need to make a move too.

• Cisco. Welcome to the game Cisco. This is how we roll. The implications here are not as big for Cisco, except this rumor has effectively squelched Monday’s news (seems like forever ago). However, this acquisition demonstrates the enormity of the players in this market and the depth of their pockets. One interesting idea would be for Cisco to acquire Dell (or merge). Similar companies, different business models. But -- if Dell and Cisco could convince large enterprises that the scalability and agility afforded by x86 platforms (along with virtualization) are better than big iron, they might do well. Throw in a tight EMC relationship, the game changes again.

• Fujitsu. Some of Fujitsu's server platforms depend on SPARC. Depending on what IBM does with Sun's portfolio, Fujitsu may need to change their product portfolio. What a pain. Not only will Fujitsu spend cash to change their product lineup, but also support a dying platform whose original hardware partner is now gone. Fujitsu, meet IBM. Make them an offer to buy SPARC.

• Intel and AMD. For these guys, they have to be bummed that another independent hardware vendor (IHV) won't be selling their wares. AMD in particular has much to lose because Sun is a heavy consumer of their chips.

Funny. Two days after the server market gets a new player, one (potentially) drops off.

[posted by: Drue Reeves]

Comments

[Ray]

Dell seems to be lost of late. Even things that they have in there portfolio, they do not know how to position them.

Dell just does not know how to play in the higher end of the data center.

Their product group needs to get their heads out of the sand.