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Washouts: IBM-Sun and Opening Day

Monday just wasn't a day for sun. Or for Sun. Here in Greater (and wetter) Boston, dark skies and drenching rains washed out the season opener for the Red Sox. (For our non-U.S. readers, the Red Sox are the local baseball team.) And over on the other coast, Sun Microsystems saw talks of a possible acquisition by IBM fade like...well, like a sunset, we suppose.

OK, so technically the talks broke down over the weekend, as these things so often seem to do, with IBM formally withdrawing its massive $7 billion buyout offer on Sunday. Still, the deal appears to be a washout on Monday (when we're writing this), just as the Sox game was. The Wall Street Journal, which broke the IBM-Sun breakdown story, followed up on its scoop by reassuring us that IBM will bravely soldier on despite this setback.

But IBM's health was never really in question. Sun is the company that has had some troubling financial news in recent years. And, oddly enough, Sun is apparently the party that walked away from the deal, with ex-CEO and current chairman, the supposedly retired Scott McNealy (he lives!), opposed to selling the company he co-founded.

McNealy's move has already drawn criticism from some quarters, with pundits comparing Sun's resistance of IBM to Yahoo's thus far not-so-successful resistance of Microsoft. The thinking there is that Sun is worth about as much now as it'll ever be worth, so now is the time to sell.

Here at RCPU, we've long respected McNealy as a technology visionary and a feisty competitor, but we do wonder whether he's a little bit too proud of his baby right now. Consolidation is normal in any industry, but we at RCPU aren't always huge fans of it when it comes to technology companies.

Sure, a buyout by a bigger firm can boost a smaller company's coffers and foster innovation. But purchases of one big vendor by another often have the opposite effect, with the buyer and the bought spending more time trying to merge operations than actually combining forces to come out with cool, new stuff.

Sun has always been an innovative company with a West Coast culture; it's not that IBM's not innovative, but Big Blue's button-down approach might not fly with folks who currently work for a pony-tailed CEO in the person of Jonathan Schwartz. Then again, as we said a couple of weeks ago, if IBM can end up being the company that saves Sun's technology, the deal might be good for the industry -- if not for Microsoft partners, who would (eventually) face a bold new competitor, especially in the cloud computing market.

Sun's financial situation is difficult, to say the least, and while we'd like to see Sun survive as an independent company, the pressure coming from Wall Street might be too much for the defiant McNealy. We suspect, as many other watchers do, that the deal might not actually be dead yet. The big question now is: With rain forecast all week for Boston, will IBM buy Sun before the Sox play their first game? Probably not, but stay tuned.

What's your take on IBM and Sun? Can Sun survive on its own? What would a merger mean for Microsoft partners? Send your thoughts to lpender@rcpmag.com.

Posted by Lee Pender on 04/07/2009 at 1:22 PM


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