According to the Wall Street Journal IBM is in talks to buy Sun Microsystems Inc for at least $6.5 billion. That price tag would translate into a premium of about 100 percent over Sun’s NASDAQ closing price Tuesday of $4.97.
WSJ displayed a masterful ability to hedge their bet by saying that a deal with IBM could happen as early as this week – or fall apart! They also noted that if IBM does buy Sun, it would be the company’s largest acquisition since it bought Canadian software maker Cognos for about $5 billion in January 2008.
According to IDC, IBM is already the server market share leader with a commanding fourth quarter share market share of 36.3 percent. HP next with 29.0 percent, then Dell at 10.6 percent; Sun, 9.3 percent; and Fujitsu, 4.2 percent. With an acquisition of SUN IBM will have, at least on paper, a commanding market share lead. However, acquisitions do not always deliver on market share expectations. Just ask the SUN (STK) storage folks or for that matter the HP (Compaq) storage folks.
With Cisco’s announcement this week establishing themselves as a new player in the server space, can we expect a wave of mergers and acquisitions? This foray into the server market and the strengthening of their relationship with storage leader EMC it looks like Cisco is redefining the term “co-opetition” by positioning themselves to aggressively challenge former OEM partners HP and IBM, not to forget Dell.
If this rumor is true the obvious downside is the elimination of another major player. Undoubtedly it will create ripples in the industry that could be as significantly positive as potentially negative.