IBM's Revenge on Sun and Microsoft's Brush with Reality

Could IBM be the biggest beneficiary of Oracle’s acquisition of Sun? Plus: a poor review for Microsoft’s Web-based reality TV show.
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There are a couple of things I think are interesting this week. The first is watching Sun pass into history and weighing which company seems to be the biggest beneficiary. The second is that Microsoft is experimenting with a reality TV program using Jack and Suzie Welch which, while interesting as a concept, seems to have too much reality and not enough entertainment value. It makes me wonder if the Welchs should have taken on the Sun merger problem for Oracle.

Sun and Ugly Mergers

Unlike most companies that are doing or planning mergers at the moment, Oracle is an expert at doing them well.

However, this merger is not an acquisition of a company like PeopleSoft that is close to Oracle's core competence. It’s the acquisition of Sun, a company that got caught in a transition between hardware and software, was clearly failing, and isn't close at all to Oracle's core competence.

That means while it may go better than AT&Ts acquisition of NCR, or IBM's acquisition of ROLM, it will have more similarities to the problems associated to those out-of-competence zone acquisitions than Oracle's typical work.

This kind of acquisition virtually never goes well despite the competence of the acquiring company, because there is simply too little understanding of the differences between the two entities. In watching mergers like this over the last several decades I've concluded that the problems are associated more with the similarities than the differences. That’s because they create a false sense of confidence that the problems are known when they are not – and the learning on the job costs kill the effort.

This doesn't mean that Oracle won't get at least some of the promised benefit from their acquisition of Solaris, Java and the related tools and support structures. These should enhance Oracle's offerings though, as a platform vendor with Unbreakable Linux, their performance has been below lackluster, suggesting that even here it will not meet expectations.

In a good merger you want to see strong competencies in the related areas from the acquiring firm or their lack of competence is very likely to break what otherwise might be working reasonably well in the acquired firm.

Of course, given Sun's financial performance, it’s a stretch to say they were executing well, particularly with Solaris, and Java really hasn't been much of a financial engine for the firm even though it is well regarded and widely used.

This creates a problem for Sun customers. They know that Solaris is not a platform that is likely to be around long and that they will be pushed onto a platform, Unbreakable Linux, which they haven't seemed to want up until now.

Many are not currently big Oracle customers either and, from their perspective, for good reason.

So where are they going?

Is IBM the Major Beneficiary?

The big problem is hardware as, anecdotally, it appears the Sun customers know they are on a bubble. Investing in additional Sun hardware would be very difficult to justify if, as expected, Oracle either abandons it or finds a buyer that is not acceptable to these Sun customers.

Sun's class of product sells to a relatively conservative market, at least on the server side. Even aggressive discounting doesn't seem to be eliminating much of the related concerns. Even x86 Workstations, which you would think would be the least risky, appear to be under heavy pressure. They seem to have dropped into the same bucket with white box systems because of concerns surrounding the continuance of the Sun brand.

What I think is interesting about this is that for most of the 90s Sun preyed on IBM accounts and bragged about how easily they bagged IBM customers. It appears that IBM is now going after Sun accounts with a vengeance using aggressive programs, targeted services, and focused partners and sales representatives.

The result, and this is all anecdotal at the moment, is that it appears that IBM may be capturing much of the business that is resulting from this merger and that has a Karmic element to it.

The reasons may be kind of interesting.

Next Page: Why IBM?

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Tags: Linux, Oracle, Microsoft, IBM, mergers

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