SUN’s stock has increased of 78% yesterday, meaning that Wall Street is taking the rumors pretty seriously.

This move would create an industry giant and would reinforce IBM on the server as well as on the software and services market. Synergy effects resulting from this acquisition would especially help IBM compete against HP on the server and storage market. SUN’s latest financial results were poor and even put in question the viability of the company itself. SUN’s customers can now be sure that one strong company will support them. On the hardware side, IBM’s and SUN’s blade market shares account respectively for 25% and 5% of the total. A consolidation of these portfolios could help IBM compete against HP’s unrivaled leadership on this fast-growing market. IBM and SUN already work together (Lotus Symphony, IBM’s collaboration suite, already integrates SUN’s open-source OpenOffice.org tools suite) and these two companies are known to be strong open-source advocates. However, this acquisition still raises lots of questions.

SUN develops (with Fujitsu) its own SPARC processor line for high-end, business-critical servers and IBM’s POWER processors are their direct competitors. Processor development is an extremely expensive process and I cannot imagine IBM maintaining two different processor lines within the same company and I assume IBM would eventually drop SPARC. So what about customers, especially in the financial and communication industries which have a big SPARC install base ?

AIX, IBM’s Unix, competes directly versus SUN’s operating system Solaris on SPARC, moreover, Solaris is a direct competitor to Linux on the mass market x86. SUN’s strategy toward Linux has always been from hesitant to hostile whereas IBM has always been a great Linux supporter. Big Blue will have to deal with a portfolio problem, as well as with internal cultural problems. Solaris’ users and admins are very loyal to it and SUN has put Solaris at the heart of its datacenter strategy. If IBM was to drop Solaris for AIX, this would mean a lot of frustration for the Solaris community.

Finally, on the database level, IBM’s DB2 and Informix compete versus MySQL and PostgreSQL (the latter not directly owned but pushed by SUN) and SUN’s open source application server Glassfish is a direct threat to IBM’s middleware technology Websphere.

A merger between SUN and Dell would have made more sense from a pure portfolio perspective :
- Dell has a strong blade and x86 portfolio
- it owns no business-critical line of servers
- it could have pushed Solaris on x86
- Dell has no footprint neither on the application, nor on the middleware, nor on the application layer.
Perhaps has IBM moved before Dell did, fearing an emerging third strong player on the datacenter market.

Even though SUN’s acquisition by IBM is not official yet, I think the two companies will have really a hard time until they are completely integrated. The two companies have different technology and business cultures and SUN’s products mostly directly compete with IBM’s. Furthermore, today’s economic climate will make things even harder, since Big Blue could loose a lot of energy for the integration instead of focusing on customers. Of course, both companies together can leverage their huge portfolio to create synergy effects, however, I doubt this would happen soon.