Customers positive on Sun's CenterRun acquisition

Sun Microsystems's acquisition of Redwood City, California, software company CenterRun Inc. will fill a critical hole in Sun's N1 software strategy, customers said on Thursday.

This week Sun disclosed that it has signed an agreement to acquire the application provisioning software company. The deal is valued at US$66 million, according to sources close to the negotiations.

The transaction is expected to be completed by the end of September.

"It's obviously a great fit in the N1 strategy, because it provides the application provisioning software," said Sun spokeswoman May Petry. "We evaluated several companies and they seemed to fit best," she said.

CenterRun is a three-year-old company that makes software that allows data center applications to be more easily installed on a large number of machines. The 35-person company includes First American Corp., Kaiser Permanente, and Verisign Inc. as its customers.

Some of those customers agreed with Petry's assessment of CenterRun as an important component in Sun's plans to develop software that will let data center computers be more flexibly and easily re-allocated to new computing problems, a strategy called N1.

"It was the missing link in the N1 strategy," said Charles Beadnall, the director of systems architecture at Verisign.

After Sun's November 2002 acquisition of server provisioning company Terraspring, a purchase in the application provisioning space seemed like the inevitable next step for N1, he said. "Obviously, the application has to be managed in order to do all the magic that Sun is planning to do down the line."

Though Sun does not boast a stellar track record as an acquirer of software companies -- its acquisition of NetDynamics Inc. and Netscape's iPlanet software did not translate into successful Sun products -- the CenterRun acquisition may be different, said RedMonk LLC analyst Stephen O'Grady.

"Times have changed somewhat for Sun," he said."I think software plays a far more critical role in Sun's overall enterprise strategy these days. With Jonathan Schwartz (Sun's executive vice president of software) and some of the things that are going on over there, there is a framework in which acquisitions can be fit."

Schwartz has some firsthand experience in software company acquisitions. His Lighthouse Design Ltd. was acquired by Sun in 1996.

"We view it as positive," said CenterRun customer Bill Pelzar, who is CIO (chief information officer) of The College Board. "What I like about Sun is (that) their management are really good thinkers, and I think they've probably thought this stuff through better than other firms would. If you were telling me that IBM (Corp.) or (Hewlett-Packard Co.) did this, I'd be a little more concerned."

Both Pelzar and Beadnall expressed concerns that Sun could favor its own Solaris operating system over competitors such as Microsoft Corp.'s Windows or IBM's AIX, once the acquisition was complete, but this scenario seems unlikely, according to Pelzar. "Every company has a Microsoft (project) going on. We don't see that it would be in Sun's best interest to turn their back on Microsoft right now," he said.

Sun's Petry had no comment on the company's plans for CenterRun. "The acquisition is not closed, so we can't really speculate much further on what we're going to do with the product," she said.

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