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Summary:

With IBM rumored to have made a $6.5 billion buyout offer for Sun Microsystems, it appears the company that coined the phrase “The Network is the Computer” is in play. But no one should allow IBM to walk away with Sun — which is still rich […]

With IBM rumored to have made a $6.5 billion buyout offer for Sun Microsystems, it appears the company that coined the phrase “The Network is the Computer” is in play. But no one should allow IBM to walk away with Sun — which is still rich with talent, technology and engineering chops — at that price. All IBM would do is sell it off in pieces and keep a few jewels for itself, essentially eliminating a competitor. Everything else is codeine-influenced pillow talk.

I firmly believe Sun is a great engineering resource. The problem would be running the place, as anyone who bought it would be taking on a serious management challenge. Still, I can name a few potential suitors — Hewlett Packard, Dell, Juniper Networks or Hitachi, or even private equity guys (led by former Sun co-founders) — that would be up to the challenge. Damn, if I had the money, even I would try to buy it.

But no one is better equipped to buy and manage Sun than Cisco Systems. Despite its bold entry into “unified computing” with the launch of a new line of blade servers, Cisco is a newbie in the field and its product line so far is limited. Sun has a vast array of products, not to mention significant software resources (MySQL) for Cisco’s vision of unified and cloud computing and the sales channels and existing customers to help execute it. (IBM has all those things already, and it can pick up new customers via Sun.) More importantly, it has engineers — the very people Cisco values most and historically a strong factor in the networking giant’s acquisition decisions.


While Cisco also has a deep bench of folks who could run Sun, I would want them to bring back Mike Volpi and put him in charge of the task. He worked well with the Cisco executive structure, and he has a scrappy attitude and a relentless focus on sales. I can’t think of a better reason for John Chambers to bring back Cisco’s “prodigal son.”

  1. yes!!

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  2. yes. still don’t get how cisco intents to win in the server market.

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    1. maybe they start by doing just that – buying sun. it is a good way to win the market. i really think sun is not as bad as people make it out to be. it just needs some tough love.

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  3. the premises here are not supported by facts — maybe they are “codeine-influenced” :-) Sun has steadily been eliminating itself as a competitor, so no pressing need to acquire for that reason. and IBM doesn’t have a habit of breaking up its acquisitions and selling off pieces. Stacey’s analysis demonstrates a much better understanding of IBM’s strategy and why it could make sense.

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    1. CloudAS

      Stacey and I had different point of view on this and only time will tell how this really shakes out. I think at $6.5b, this is a steal and I think Cisco should get into the action.

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  4. Yes, I agree Om that Cisco should buy Sun. If reports were true that Cisco’s sitting on something like $30Bn cash, they should put some of it to good use and bolster their datacenter takeover strategy by buying Sun and announcing with a bang that they are indeed serious about the cloud.

    Should be happy days in the Bay area when that pushes through.

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  5. I’ve been wondering whether Apple would be a better company to takeover Sun. I see a lot of redundancy between Sun and IBM – in databases, operating systems and servers. Compare this with Apple. Apple has nearly zero market share in the enterprise. Apple has some servers, but I suspect that they are only sold to Apple shops like universities. Apple is flush with cash and can easily absorb Sun. Then again, I cannot imagine how Apple would pull this off during a period while Steve Jobs is on leave. Plus that it could be a distraction from what makes Apple successful – consumer electronics.

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    1. Greg

      I think Apple has moved into a whole different direction and well there is nothing “enterprise-y” in their approach. I think it would be more of a distraction and take company’s attention away from its core business of consumer electronics.

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  6. If Cisco buys Sun, it would be a total disaster. Culturally, companies are incompatible. Cisco is very product and results driven. Sun is very collegial, many projects are really ran like science projects. This would be devastating for most Sun people.

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    1. @Enemes,

      I disagree. Mostly because that collegial atmosphere hasn’t really worked out that well for Sun. I think the company needs a swift kick in the “you know where.” It needs a sense of urgency and it needs to approach every day with new energy. Cisco will bring that to the mix. I think IBM will be an utter disaster. I really don’t think IBM can make those big changes.

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      1. In theory, if things could have a chance of working out as you described, I would agree. The reality is very different, however. Surviving at Cisco is not a trivial matter, especially if your business unit is not gaining traction. Cisco can be viewed by many as much more of a non-creative, business-driven environment. This is the reality of it. In many cases it worked out well. In some cases some very interesting things that were not really trivial got killed.

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      2. Om,

        I agree with you. Actually, I would think Sun has more in common with Cisco as compared to IBM, as far as cultures are concerned. IBM is a more buttoned down blue suited East Coast kind of company. Cisco is more like Sun in that they both have their roots in Silicon Valley

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  7. I always wanted to work for Sun. They have some really fantastic talent and a wealth of ideas. Also, I agree that Cisco will probably benefit the most form acquiring Sun, but IBM is a good suitor as well. I am not so sure about HP or Dell as suitors compared to Cisco and IBM.

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  8. Good points but Schwartz ran that company in the ground. Unfortunately, Sun lost is way. Everything went open, Java’s free and they had no way to capture R&D dollars from developer tools or services to remain competitive. Sparc is a power hog and will most likely disappear inside Big Blue. There won’t be a price war for this one I’m afraid.

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  9. nobody should buy SUN ….give that company some more time ……..if focus on selling software more and harware indirectly thru cloud they will back in business

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  10. I disagree with you on this one, Om. While Cisco is looking to enter the enterprise computing space, it has no experience in application software and higher level consulting services. It reminds me of AT&T and NCR in the 90’s where you would think it’s a complementary fit, but it actually causes more problems than it solves. IBM has a great deal of experience in working with multiple hardware platforms, software platforms, services groups. IBM has the ear of the business and IT exec with a strategic and solutions focus. Sun’s platforms will actually do better with the IBM salesforces and the already strong link with IBM Global Services. MySQL, Java and Sun’s other software platforms would fit well with similar IBM initiatives.

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