Unix server giant Sun Microsystems has unveiled a surprise deal to buy storage systems and software vendor StorageTek for approximately $4.1 billion.
The move, which took many IT market watchers by surprise, will enable Sun to finally establish itself as a major storage vendor, after many years on the sidelines. In particular, the takeover puts Sun in a strong position to the fast-rising demand for information lifecycle management.
“This acquisition is part of an ongoing strategy to respond to customers seeking to rationalise their data centre purchases to free up time and dollars to focus on compliance, architectural integration, security and, of course, the bottom line,” said Scott McNealy, chairman and CEO of Sun.
In recent years Sun has struggled to regain the lustre it once build as a pioneer or Unix workstations and servers, and the inventor of the Java software environment. Its server business has been progressively weakened by demand for more commodity Windows and Linux-based machines. And its various attempts to expand into software have done little to halt its revenue and stock prices declines.
By swallowing StorageTek, Sun gets a company that battles head to head with IBM for the leadership position in tape storage – both claim about a third of the market. In recent years, StorageTek has exploited the growing demand for tools and systems to management the storage and archiving of data across its lifespan. It has also made tentative steps to re-enter the disk drive market. In the 1990s, it build and then licensed the ‘Iceberg’ range of storage devices to IBM, before IBM created its own follow-on range and snuffed out StorageTek’s disk drive ambitions.
When it comes to storage market shares, Sun trails well behind IBM, HP and EMC, battling for fourth place against Hitachi Data Systems (HDS) and Dell. In fact, the company lacks a high-end storage product of its own; instead it resells HDS’s Lightning range under the StorEdge 9900 label. How the StorageTek deal will impact that arrangement has yet to be disclosed.
McNealy seems confident that StorageTek will allow it to become a major storage vendor on the back of demand for ILM. “When combined with StorageTek, [Sun will have] an unmatched ability to earn the confidence of customers as they develop, deploy and manage information assets throughout their entire lifecycle,” he says.
The transaction involves Sun paying $37 per share for StorageTek – an 18% premium on its closing price prior the deal’s announcement.
The price may go a long way to explain StorageTek’s measured response to the news. In a statement, StorageTek’s CEO and chairman said: “StorageTek’s decision to combine with Sun reflects our determination to act in the best interests of our customers, shareholders, employees and other constituents. This is the right transaction, with the right partner, for the right reasons, at the right time.”
One reason for that might be that StorageTek is a supplier of tape systems to several of Sun’s rivals – including Hewlett-Packard.