They Know, Sun Now in the Kill Zone

HP and Oracle are also tendering an offer for Sun. We reported on IBM’s offer here. The deal would have Oracle taking the Software assets and HP taking the manafacturing, firmware and OS components. The interesting piece is this offer appears to be a defensive postured affair and undervalued compared to IBM’s tender –

A potential deal between the three is understood to have been blocked by IBM, in the middle of talks to buy the whole of Sun for a reported $6.5bn.

Oracle, HP, and Sun declined to comment on what they called rumors, while IBM was unavailable for comment at the time of going to press.

A source, who didn’t want to be identified, told The Reg that Oracle and HP had gone in to meet Sun to discuss the possible deal.

It’s already been reported that Sun had been shopping itself around Silicon Valley, with HP named as a potential buyer.

This, though, is the first indication that HP had teamed with Larry Ellison’s M&A beast Oracle - which has bought 50 companies in four years - to take only what they wanted from Sun. At $2bn, this would have been one of Oracle’s large purchases, slotting behind PeopleSoft and BEA Systems.

HP, Oracle know that to permit the IBM deal to go through would make it rough on them on multiple liines of business. But are they any better fit than say IBM? Probably not and here is why.

Consider HP, why buy the Sun Sparc line? If you look at their product mix, HP has been better at keeping the products separated in the market than IBM. So to buy Sun hardware seems counter intuitive to their overall product plans. The counter argument is that like IBM, HP assumes it is cheaper to buy Sun market than compete against it. If both companies would intended to keep Sun manufacturing going then the key is their view on the value of the longtail.

Looking at Oracle I have even bigger concerns. To Sun’s credit they were trying to move to the Open Source model on the software side. That is something that Oracle practices, but I would not say it is with relish. IBM on the other hand has literally had to breath Open Source. If they had not done so in the 1990’s good chance they might not be here today. It’s part of their culture. The saving grace with Oracle doing so is that there is not much overlap with what they provide and Sun provides. Most projects would be able to continue without the redundancy review factor in play like with IBM.

The bottom line of course is will the shareholders be willing to settle for less than IBM is offering. When it’s cash, usually not.

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