AP News, August 17th, 2007
Two longtime rivals in computing, IBM Corp. and Sun Microsystems Inc., plan to cooperate on server technologies, a move that could put pressure on their joint competitor Hewlett-Packard Co.
Sun's chief executive, Jonathan Schwartz, called it a "comprehensive relationship" that "represents a tectonic shift in the market landscape."
The collaboration announced Thursday will enable Sun's Solaris operating system to run on IBM servers. Among other things, that means customers that run Sun servers will be able to switch to Big Blue's hardware without having to rewrite any programs.
At first this will be possible on IBM's "x" series of servers, which also run Microsoft Corp.'s Windows or the open-source Linux system. But eventually IBM hopes to bring Solaris to the mainframe, the big multitasking machines that have been one of the company's core profit centers for decades. (One of the biggest bashers of the mainframe as a supposed dinosaur used to be Sun's former CEO, Scott McNealy.)
IBM has been expanding the kinds of programs that can run on mainframes, to encourage customers to consolidate multiple servers onto these bigger machines as a cost-saving move.
These steps threaten to take Sun servers out of action in favor of IBM machines. But Sun can gain from this partnership by collecting Solaris service subscriptions from customers who run that operating system on IBM hardware. Otherwise, Sun risked losing customers entirely to IBM.
The arrangement is in keeping with Sun's strategy to rebound from a devastating slump in the first part of the decade by broadening its role as a software vendor. This week, Sun and Google Inc. expanded their partnership as Google began distributing Sun's StarOffice suite of word processing, spreadsheets and other desktop programs.
"Our view is when you make your products available on other people's platforms, you just meet more customers, which just gives you more opportunities," Schwartz said.
Left out of the mix here is Hewlett-Packard, which is locked in a battle with IBM for leadership in the worldwide server market. IBM and HP each had 29 percent share in the most recent assessment by market tracker IDC, while Sun and Dell Inc. were tied for third with 11 percent each.
HP actually already supports a downloadable version of Solaris on its servers, though Pund-IT Research analyst Charles King said the more formal IBM-Sun relationship would help insure optimal performance and service.
HP's vice president of server marketing, Paul Miller, took issue with that idea, saying customers would not notice any difference from IBM and Sun's deal.
"I don't see what a collaboration brings them," Miller said. "I don't see an additive technology here."
Relationships like the Sun-IBM deal, in which companies collaborate on one front and compete on others, are common in the technology world. Sun and IBM, in fact, worked together in the 1990s to spread the Java programming language, which became a key ingredient of the Internet.
But analyst Bob Djurdjevic of Annex Research said this could herald something deeper between Armonk, N.Y.-based IBM and Santa Clara, Calif.-based Sun _ perhaps an eventual acquisition of Sun by its older, larger rival.
In that scenario, IBM and Sun would have a broad software portfolio to sell together, and they could join forces on the very expensive development of next-generation microprocessors for their servers.
"I don't know if that's in the cards, and that may not even have been discussed," Djurdjevic said. "But you want to walk before you run, and crawl before you walk, and this could be the crawling stage."
Neither William Zeitler, who heads IBM's hardware business, nor Sun's Schwartz would comment on that possibility. However, they made clear in a joint interview that their companies expect to strengthen their ties.
This partnership grew out of a meeting about a year ago, when Schwartz had just taken over as Sun's CEO from the more combative McNealy and reached out to IBM. Schwartz and Sun executive Brian Sutphin met with Zeitler and IBM CEO Sam Palmisano to "brainstorm on ways we could work together," Schwartz said, and came up with a list of "10 to 15 interesting market opportunities."
IBM shares fell $1.54, or 1.4 percent, to close at $109.69, while Sun gained 7 cents, or 1.5 percent, to $4.72. HP stock was down 10 cents to $46.05.
