A Theory on IBM’s Sun Buyout

With regards to SUN’s buyout by IBM, it stuck me as odd that IBM would offer $7Billion for a company which it has alot of overlap with. Both IBM and SUN sell servers, both are also familiar to the OpenSource scene and should have no problem benefiting from one another’s expertise in software. So why would IBM offer to buyout SUN then withdraw?

Well here’s my theory

I think this is a move by IBM who might feel currently threatened by Cisco’s recent entry into the server business. Initially they might have thought they could buyout SUN and prevent Cisco from acquiring them, but they weren’t willing to pay the full price because they know they will not benefit from Sun. So the plan is to make it difficult for Cisco to buy SUN out given the low and crazy valuation set by the marketplace.

After IBM’s move, Cisco will have to beat IBM’s offer before they can buyout SUN. IBM’s plan is to make a dent in their foes balance sheet, so they would be less effective in their competition. If the move would deter likely suitors from the buyout, then this would be a blessing for IBM.

My prediction is A buyout will occur from either Cisco, for the server expertise, or Oracle, for the service and software talent (anyone for OracleDB + ZFS + Oracle Sparc Servers). Both companies have good synergies with Sun and the resources to buy them out.

Is this different from MS, Yahoo buyout?

yes! Sun could afford to play hard to get because, unlike yahoo, they have two suitors who are better than IBM. Yahoo only had MS, and to this day I don’t see how the two companies could function as a unit.

Disclaimer: The idea was born out of a discussion I had on /., I also don’t own JAVA,IBM,CSCO, or ORCL stocks, but seriously considering JAVA should it drop further.

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