Sun Buying StorageTek for $4.1B

MarkEst1973 writes "Sun Microsystems Inc. is buying Storage Technology Corp. in a $4.1 billion cash deal, the companies announced Thursday. The acquisition answers lingering questions about what Sun would do with about $3.1 billion of balance sheet cash. StorageTek is a profitable company with $191 million in profit in '04 on $2.2bn in sales while Sun posted a loss last year (albeit a much smaller one than the year before)."

Comments

Reverse acquisition?

[sjbe]

This strikes me as something close to an exit strategy by way of diversification for Sun. Their core server business is seriously erroding and under attack from all sides. This gives them potentially two things. First, a way to provide integrated product lines. Servers and storage are complementary businesses and I could see Sun offering tightly bundled turnkey installations. Second, this gets Sun a profit center to keep them afloat as they transition their business model.

Though it might not be advertised as such, this might be akin to a reverse acquisition since StorageTek is profitable and Sun isn't. It's interesting, though not surprising, that Sun had to pay cash. Their stock isn't worth much these days and no one is going to lend them money with a BB+ credit rating.

Re:Reverse acquisition?

[clem]

Don't count Sun out yet...it employs many smart people.

Yes, but they also have a number of rabidly political middle managers who do their best to ensure that the smart people are left rotting on the dock.

Why, yes, I am a former employee.

Re:Reverse acquisition?

[Bryan-10021]

An exit strategy like IBM in the 90's? Companies go through good times and bad times and Sun will turn themselves around just as IBM did.

For those too young to remember the 90's, it was a time when IBM was getting beat up by RISC UNIX boxes from HP and Sun and mainframes were on the way out.

If Sun wanted to get out of the server market then how do you explain spending $500 million on Solaris 10? Why invest in an all new line using it's own developed Sun hardware based on AMD Opteron chips? Or the new SPARC Throughput Computing chips (http://www.sun.com/processors/throughput/)?

Re:Reverse acquisition?

[fupeg]

Nowadays, middle management actively sabotages anything remotely possible of success simply because they cannot tolerate the thought that an engineering team might create a technology that could save the company.

That's interesting. The reasons behind Sun's failures are no secret. They made a ton of money in the late 90's selling Big Servers. They expanded like crazy and spent a lot of R&D money on making Even Bigger Servers and on developing software for Big Servers. They were in the worst possible position when the bubble burst. They did not handle the shift to smaller, faster x86 based servers. They did not handle the shift to open source enterprise software, even though much of it was written in their very own Java language.

It was a lot like the American car makers of the early 70's who were not able to deal with the public wanting smaller, more fuel efficient cars instead of just bigger and faster ones. Of course bigger, less fuel efficient cars did make a big comeback eventually, in the way of SUVs. Similarly, maybe Big Servers are making a comeback in the way of multi-core chips?

Anyways, externally that seems to be why Sun has fallen on hard times. They were too heavily invested in technology that was fueled by the dot com and telecom bubbles, and were unable to adapt to disruptive technologies (fast x86 servers, open source software such as Linux.) I had always guessed that this was just another case of smart people making clever technology that nobody wanted. It would be interesting to know how company politics played a role in this. Were engineers advising smaller, cheaper servers in 2000 and nobody listened? Did engineers want to switch to open source software in 2001?

Re:Reverse acquisition?

[illumin8]

They did not handle the shift to smaller, faster x86 based servers. They did not handle the shift to open source enterprise software, even though much of it was written in their very own Java language.

I think this is an accurate assessment. When Linux and Open Source started to become a real market force, there were a lot of geeks and engineers within Sun that were very pro-Linux. We could see that Linux was the future. Then, there were management types that only saw Linux in the same close-minded view that Microsoft does, as a competitor that should be crushed. The problem is that although there are pockets within Sun that are very pro open source, they get drowned out by the groupthink that permeates from the top down. The groupthink that says "Linux bad, closed source good..."

It has gotten to the point where if you're a Sun employee, it could be dangerous to your career to be too much pro-Linux. For example, I had workers on my team snicker at me and say comments like "kid's OS" whenever I'd discuss something about Linux.

Think of it like this: If you're a Microsoft employee, when you're sitting around with your co-workers at lunch, are you going to tell them you spent the weekend at home setting up an Asterisk server running Linux? Not if you value your job you're not.

This culture permeates the company, and stifles innovation.

This is how I would fix Sun:

- If you manage a team of less than 10 people, you're out, period. There are many middle-managers that only have 4-5 direct reports and pull in 6 digit income. They came on-board during the dot-com boom and play political games to ensure they never get laid off. They would be the first to go. I'm sorry, I don't care how good you are, if your only job is to sit around and tell 4 or 5 people "work harder", you're not needed.
- Fire Scott Mcnealy. Really, I don't see how he's lasted this long.
- Get new executive level management that has a clue.

I think the first solution alone would probably cut 1000 head count and bring Sun to profitability immediately.

Anyway, what do I know, I'm just a former SSE that worked for a Sun partner.

I do like system administration on Sun though. I also like Linux. There's no reason those two platforms can't co-exist. The right tool for the job is what I always say...

Re:Reverse acquisition?

[1lus10n]

Also a former employee here. I dont think mcnealy is the problem. Its the people between mcnealy and the talent. People like schwartz (who has to be the biggest fucking ass ever).

A lot of people think Sun will get bought out, the name and talent alone are worth the going rate these days. Buy sun, fire all of management and essentially absorb the engineering and service departments.

Re:Wait....

[stlhawkeye]

Only half joking....lots of organizations I know of are pulling their support for Solaris and are buying cheaper machines from other vendors to run Linux on. I'm sure Sun has a substantial customer base left, but I wonder how long it will last as Linux continues to rise.

Every place I've worked has either abandoned or is in the process of abandoning Solaris. Java is probably Sun's future.

product synergy

[Anonymous Coward]

While Storage Tek gives Sun some profitable product. The main benefit to Sun is a foot in the door with ST customers. So long as they don't pursue approach of requiring ST customers to buy other Sun hardware if they want ST product, it should be a good long term play for increasing sales in all lines. If things don't pan out, it's a good exit stratregy as it will result in short term boost to sales by squeezing 'stuck' customers until they squeal, allowinf Sun execs to dump stock.

Re:I for one welcome our new .com bubble

[njcoder]

This isn't that bad a move. Sun has a ton of cash and needs to start making some investments with it. Sun's storage solutions have been all over the map and hopefully the aquisition of StorageTek will solve that problem. With StorageTek and Tarantella they've really made some good moves in providing a full solution to future enterprise computing needs.

Ever since sarbanse oxly, storage has been a gold mie business. People need to store insane amounts of information now.

What sun really should figure out how to do though is do to storage what it's doing to servers with opteron processors. Otherwise that storage company Larry Ellison is funding is going to eat everybody's lunch.

Sun == Digital Equipment Corp

[Odonian]

I used to work for Digital, designing Alpha workstations. When they couldn't break a profit in that market, we fell back and concentrated on the higher-margin server market only. When that didn't work, we fell back again to making alpha-based storage servers.

The rest of course is history, wasn't long before the Compaq buyout, retirement of the Digital brand, and end of production of the Alpha chip altogether; ie total company death.

Sounds a lot like that.

dumbasses

[Anonymous Coward]

AMD would have been a much better buy a few years ago, SUN could have turned into an IBM.

What were you thinking Scott and John?

Re:Dumb dumb dumb

[Dammital]

"Lets buy a tape storage specialist..."

... who, BTW, also manufactures and markets disk array subsystems. When IBM's own array products floundered, they ended up remarketing STK's disk subsystem as the "IBM RAMAC Virtual Array", which arguably kept EMC from eating IBM's lunch.

"... geriatric technology..."

You ought to learn something about the "geriatric technology" before you take shots. Those nines of uptime come as a result of redundant design, high quality components and media, and a paranoid culture shared by both the vendors and practitioners.

"... boardroom relationship based Sales that go away with the boomers retiring in the next ten years."

If more PFCSKs would actually talk to the boomers then they might find that we solved a lot of their problems years ago. Businesses came to depend on automation during our watch, and we were required to make the automation reliable and continuously available. This meant expensive hardware, complex software, mountains of documentation and more bureaucracy than you can shake a stick at -- change management, capacity planning, maintenance procedures, quality control, all that stuff that you hate to do, that gets in the way of the stuff that you want to be doing, but which keeps your business running.

(Sidebar: bureaucracy isn't a dirty word. It keeps enterprises going even during periods when you have sickouts or turnover or hurricanes or management changes or... whatever. It's hard to change procedures in a running bureaucracy, but it's also hard to kill a well-running one.)

We boomers, along with our "geriatric technology" and our inflexible bureaucracies, operate an astonishing amount of business that most people simply take for granted. It's like picking up your telephone -- everyone just expects to hear a dial tone, and never stop to consider the combination of science, technology, sweat and (yes) bureaucracy that makes that dial tone available to you 24/7. It's disheartening, really. Figuratively speaking, we provided dial tone for years, and the PFCSKs come along with downloadable ring tones and now management oohs and aahs. Okay, so I guess we should have marketed ourselves better.

(And yes, I wish more boomers would listen to the PFCSKs, too.)