Blog: Claudia Imhoff

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Sun Bets Big with StorageTek Acquisition

Sun announced today that it is acquiring StorageTek for $4.1 billion (all in cash) in a deal Sun hopes will restore its financial wealth. It's an enormous gamble and the last one of this size that Sun can do given its financial war chest. Is this a sound gamble?

Sun has long been trying to reestablish itself in the server business with limited success. It has also tried its hand at selling software with its well-publicized open source push. It seems strange then that the company would turn around and buy a long-established storage company but the talk on the street is that Sun believes that storage is "where it is at" -- that is, where they will be able to make their financial fortunes.

It also means that Sun wants to transform itself into a total systems company -- basically one stop shopping for all your hardware needs a la IBM. And it means that StorageTek may get the needed push to move it out of the languishing position it has been in for years.

But not everyone is cheering the deal. A Prudential analyst, Steve Fortuna, states that the deal "reduces Sun's cash hoard by 40% and does nothing to reignite revenue growth or profitability. We would rather have seen the company buy back a billion shares and fire 10,000 people". Ouch! That is some serious criticism at a time when Sun could use some positive news.

One can only hope that this acquisition fares better than several of its past ones like Cobalt Network, Tarantella and Procom. And one can only hope that the addition of StorageTek's 1000 person sales force will help the overall sales for the combined companies... I guess all that remains to be seen.

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