Sun Microsystems's agreement to buy Storage Technology for about US$4.1 billion could be a good deal for both companies, users and analysts said. But the move, announced Thursday, left others scratching their heads and thinking that Sun could have put its cash to much better use.
There was general consensus, though, that each company had little choice but to make a significant move. Sun, in particular, had to do something to boost its storage business and its overall market position against rivals such as IBM and Hewlett-Packard, according to IT managers.
Scott Briand, a senior IT analyst at Nova Scotia Power, called the planned acquisition an "eye-opener" that may give some needed direction to Sun's storage efforts, which he said haven't been clear.
At one time, Nova Scotia Power used Sun-branded storage products made by Hitachi Data Systems. But Briand said Sun's rebranding "didn't seem to add a lot of value," and so several months ago, the company bought disk arrays directly from Hitachi. With Sun's plans for StorageTek now public, Briand said he will "look and see what [Sun is] doing and where they're going to go with it."
Daniel Grim, executive director of network and systems services at the University of Delaware, is wondering much the same thing. Grim said he recently heard from Sun representatives extolling the virtues of Hitachi's products, "and that's why I'm perplexed about what their strategy really is going to be now."
The university is a heavy user of Sun's UltraSparc systems but buys its RAID storage devices from U.K.-based Xyratex.
Joel White, lead IT architect at Allstate Insurance, said he has a number of questions for Sun executives, not the least of which is how the company will deal with overlapping products after it completes the StorageTek acquisition.
Mark Canepa, executive vice president of Sun's storage products group, acknowledged some product overlap in an interview with Computerworld, particularly at the midrange level. But rationalizing that "will be pretty simple," he said. "I think we're going to be able to realign and reassign people in order to get what's needed done."
Sun CEO Scott McNealy said during a conference call Thursday that combining the two companies brings them to a "whole new level of scale and scope on a global basis." The merger will boost Sun's sales force by more than 1,000 people and add thousands of service and support personnel, he said, adding that there are no significant changes planned in the product road maps of the two companies.
For the time being, said Bob Abraham, an analyst at Freeman Reports, "users have to take a wait-and-see attitude. It's unlikely there will be major changes within the company very quickly. It may be several years before the dust has settled."
"It's like when HP and Compaq merged. Some changes occurred, but it takes a while for everyone to understand what's necessary in order to execute those plans," Abraham said. He predicted that Sun will change little at StorageTek and keep the two firms separate over the short term to maintain stability and retain the customer base.
But Chris Foster, a storage analyst at Technology Business Research, said the deal is likely "a step backward" in Sun's efforts to boost its IT services business. "I expected Sun to make an acquisition in professional services or software," he said. "I don't think StorageTek fits that profile."
Reporters Patrick Thibodeau and Todd R. Weiss contributed to this story.