Sun swallows up StorageTek and promises more big deals

Sun Microsystems’ capture of StorageTek is likely to be followed by other deals, senior executives at the company said, as it looks to spend more of its US$7.6 billion war chest.

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By  Peter Branton Published  June 12, 2005

Sun Microsystems’ capture of StorageTek is likely to be followed by other deals, senior executives at the company said, as it looks to spend more of its US$7.6 billion war chest. On June 2, Sun announced it was to buy StorageTek for US$4.1 billion, with the deal expected to close later this summer or in early autumn. The combined company will have revenues of more than US$13 billion. “Sun’s technical and financial strength puts us in a great position to act as a consolidator in the IT industry. This acquisition is part of an ongoing strategy to respond to customers seeking to rationalise their datacenter purchases to free up time and dollars to focus on compliance, architectural integration, security and, of course, the bottom line,” said Scott McNealy, chairman and chief executive officer, Sun Microsystems. The deal will make Sun a powerhouse in the emerging information life-cycle management (ILM) arena, a market that is also being targeted by, among others, storage giant EMC. With the increasing pressure on companies to store more data to meet compliance requirements, managing all that data is a big issue. By combining Sun’s identity management offerings and its server portfolio with StorageTek’s wide range of storage products, Sun clearly thinks it is on to a winner. “With this announcement, Sun solidifies its leadership position with the highest volume computing platforms, the most comprehensive data and identity management solutions and, when combined with StorageTek, an unmatched ability to earn the confidence of customers as they develop, deploy and manage information assets throughout their entire lifecycle,” McNealy said. Sun executives said this deal is likely to be followed by others as the company looks to be a consolidator in the IT industry. In May, Sun bought software firm Tarantella for US$25 million and storage firm Procom Technology for US$50 million (see IT Weekly 21- 27 May 2005). “We’ve tended to buy small companies recently, I think those deals will keep going but Scott [McNealy] is still talking about another big one,” said Graham Porter, marketing manager for Sun Middle East and North Africa. Porter speculated that the company may look at a software buy as a logical next step. “Software and services are good ways to drive revenue, but if you look at services deals they can be problematic as you are mainly talking about buying in people. Software around the systems management field would be an interesting move for us. Network computing is what Sun is all about so I can see software around the infrastructure would be an interesting move for us,” he commented. Sun has been widely cited as needing to make a buy to deflect the pressure of declining market share in servers. “If you look at our server shipments then they’ve been growing steadily,” said Porter. “The issue everybody has is margins, it is difficult to make a profit in the hardware business, even on big complex machines.”

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