IBM CEO (Almost) Says Why IBM Targeted Sun Microsystems Acquisition

By Jessica Davis  |  Posted 2009-05-13 Email Print this article Print

IBM tells analysts that software and services are strategic for IBM's future, begging the question: "Then why try to buy Sun Microsystems?" Here's how IBM addressed that question posed during its IBM Analysts Day.

IBM (NYSE:IBM) has upped its software and services game to become 80 percent of its business, a big increase from the 50-something percent that software and services used to contribute.

But as IBM recounted its strategic moves towards emphasizing software and services putting less of a focus on hardware sales during its IBM Analysts Day today, the company almost begged the question "Why did you even consider acquiring Sun Microsystems (NASDAQ:JAVA) then?"

It's a question that plenty of people asked in March as Sun and IBM were widely reported to be in talks about an acquisition.

Bernstein Research Senior Analyst Toni Sacconaghi asked just that question at the end of the morning's presentations at the IBM Analysts Day.

While declining to name Sun, IBM's CEO Sam Palmisano says he could characterize the thought processes behind IBM's decisions to pursue certain acquisitions.

Palmisano says that IBM targets acquisitions for one of two reasons: either the deal is a good strategic fit for IBM in terms of furthering IBM's strategic plans, or else the deal is an opportunistic acquisition that presents opportunity for consolidation and margin expansion.

Reading between the lines, the proposed Sun acquisition would certainly be the latter. IBM viewed Sun as an opportunity for consolidation and margin expansion.

Sun yesterday filed its own version of its process to sell itself to another company in a filing with the Security and Exchange Commission (SEC). In the document, Sun indicates that Oracle (NASDAQ:ORCL), which eventually entered into a deal to buy Sun, was initially only interested in Sun's software business, and not its hardware business.


Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at


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