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

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[HaydnH]

Wish I'd baught some StorageTek shares before this happened... a nice 17% increase could've baught me a few gadgets...

It's about time Sun got some good storage though, I wonder if they have redundant power supplies with 2 power cables these days, it was rather annoying when you had redundant power supplies but an intern tripping over a power cable could (and did!) bring down a box.

Misread

[ParticleMan911]

Was I the only one to at first misread this as "Sun buying StarTrek for $4.1B"? This acquisition would be much more of a conversation topic.

Dumb dumb dumb

[wheatking]

Lets buy a tape storage specialist (founded in 1969) as our answer to business and technical challenges facing us today? I wonder which bright Sun exec thought up that one vs. making a smart(er) move on one of the Linux/cluster storage outfits around (Panasas et al) that will give Sun some legs for the next decade, not just geriatric technology with boardroom relationship based Sales that go away with the boomers retiring in the next ten years.

Strange pairing

[confusion]

Storagetek has had some pretty good products, but I can't see how this acquisition is going to help either company in the long term.

I used to be a big Sun supporter but they seem to be stuck in neutral lately.

A merger with EMC or Quantum would have made a lot more sense than this.

Jerry
http://www.syslog.org/

Re:Reverse acquisition?

[Glock27]

This strikes me as something close to an exit strategy by way of diversification for Sun.

I don't think so.

Their core server business is seriously erroding and under attack from all sides.

Actually, its server business has grown the last couple of quarters. Plus, its Opteron line coupled with Solaris is a strong offering. Yahoo Finance shows Sun as profitable with a P/E of 19 right now...low for a tech company.

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.

Transition its business model to what? Sun has always sold (and resold) storage solutions.

Though it might not be advertised as such, this might be akin to a reverse acquisition since StorageTek is profitable and Sun isn't.

Yahoo Finance shows Sun as profitable with a P/E of 19 right now...low for a tech company.

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.

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

Re:Reverse acquisition?

[elmegil]

And even some non-former employees see the same thing. I hope that all the pie in the sky being sold about this acquisition internally is right, but I'm not holding my breath either.

A good deal

[0xABADC0DA]

ST has $1.1 billion cash, so Sun is really spending more like $3 billion. At $191 million profit that's over 6% return on their investment. Plus you have to expect sales to increase due to companies storing more data due to the recent demise of that accounting firm due to aggressively destroying documents.

Then you factor in the forthcoming zfs, which should make Solaris far better than any other operating system for handling mass data storage and they could do very well by this deal.

Re:A good deal

[flaming-opus]

You know I've done a lot of reading on ZFS, and I can't say it's likely to make that much of a difference. It's a journalled, 64-bit (yes they claim 128, but that's junk, as the underlying scsi layer doesn't support it), scalable filesystem. It has a few bells and whistles with indexing and access controls, but nothing that isn't already in a lot of other products. Basically it's catching up with where most other 3rd generation filesystems have been for years. It's probably not a bad filesystem, but I don't think it's going to bring about any major storage revolution.

Solaris (with Veritas filesystem and volume manager) has always been a good platform for archival storage. It's a good, stable platform for a database, file-serving, and the I/O capability of the machines is quite good. Where they really need to add value is on the software side of things. It's not enough to have servers, disks, and tape drives. Anyone can do that, buy it from dell even. What else are they going to offer? What will it cost? How well does it work? I don't think it's a bad combination, but it's two ho-hum companies combining into a larger ho-hum.

Re:Wait....

[Plutor]

Where I work, we're paying sub-$4k for single-unit dual-Opteron Sun servers, on top of which we're running Linux. On a simple performance-to-cost ratio, these are the best Linux servers out there. From an administration point of view, they are a pleasure to work with, and it's a downright transcendental experience when they fail. I love my SunFire v20zs.

Re:Reverse acquisition?

[illumin8]

And even some non-former employees see the same thing. I hope that all the pie in the sky being sold about this acquisition internally is right, but I'm not holding my breath either.

What I remember from my few years at Sun was that the management team was really good at blowing smoke up your ass and making you think that Sun was going to turn around. Every quarter you'd have to sit through some meeting where management would literally almost brainwash you into thinking that Sun was the center of the universe and that soon we would take over the entire computer industry. The thing that was scary was that despite all of the negative earnings and missed sales goals, they were really good at it, and after a while of working there you start to have the same type of groupthink and sheltered worldview that management has.

The fact of the matter is that Sun, at one point in time, had great people in a position where they could accomplish a lot. 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.

What you have now in Sun is typical of a lot of companies: Management wants to drive innovation through marketing and dictating to engineers what to create. We all know as engineers and geeks that this never works. True innovation does not come from the top down, it comes from the bottom up. Think Bill Joy and BSD Unix. These were not started because some team of unemployable middle managers decided that the industry needed an open operating system that anyone could write software for. These were started because a brilliant engineer had a vision and was given the right amount of time and freedom to create that vision in reality.

The sooner Sun tanks and all of the engineers regroup into garages and really start inventing again, the better, for all of us.

Wish they bought Bea System Inc. instead.

[lost_techie]

For that kind of money, they could have bought Bea System Inc. Their valuation is $3.42 billion today.

Java is supposed to be Sun's big thing. And buying the #2 App Server company will go a long way in helping Sun in the java market. And help Sun improve its software business which I believe is higher margin than hardware.