The consolidation in enterprise technology is upon us. Once mighty Sun Microsystems is now reportedly in talks to be acquired by IBM for a mere $6.5 billion. That is two quarters of revenues for Sun. If you factor in the $2.6 billion in cash and short term investments on Sun’s balance sheet, the true offer is closer to $4 billion. Sun’s shares jumped this morning 65 percent.
Sun’s main Solaris server business has been suffering for years from the onslaught of cheaper open-source Linux servers, which it now offers as well. But Sun still holds big presence in key industries. The play for IBM is to consolidate its server market share in the face of increased competition from HP (which bought IT consulting giant EDS last summer), and now Cisco (which is trying to expand into the server and storage markets). Sun’s commitment to open standards also meshes well with IBM’s philosophy. Remember, it owns MySQL.
