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No Deal: IBM Pull Out of Sun Buyout

04.06.2009
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In direct contrast to the rumours that were going around last week, news is now breaking that the IBM buyout of Sun has fallen through. The New York Times has reported that the breakdown was a result of shifting balance of price and conditions for the deal.

 After the legal review, I.B.M. shaved its offer Saturday from $9.55 a share, the proposal on the table late last week, to $9.40 a share, said one person familiar with the talks. The offer was presented to Sun’s board on Saturday, and the board balked. The Sun board did not reject the offer outright, but wanted certain guarantees that the I.B.M. side considered “onerous,” according to that person.

Sun then said it would no longer abide by its exclusive negotiating agreement with I.B.M., a second person familiar with the discussions said. On Sunday, I.B.M.’s board decided to withdraw the offer

What now for Sun? IBM never needed this deal as much as Sun did. But I don't think Sun are in an impossible position. Given the amount of concern shown by developers at an IBM buyout, perhaps they are more confident of their place in the industry now. It will be very interesting to see Sun's next step.

 

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David Gilbert replied on Mon, 2009/04/06 - 2:37am

Given the amount of concern shown by developers at an IBM buyout, perhaps they are more confident of their place in the industry now.

Maybe, but I'd guess that most of those developers showing concern aren't actually Sun customers, but just developers that don't want to see the "free stuff" from Sun disappear. I think it is really sad that Sun's open source strategy appears to be not sustainable (business-wise), but I think that is the reality, as much as I'd like to be proven wrong.

Karsten Silz replied on Mon, 2009/04/06 - 4:07am

By shopping itself around (as remarked by Intell boss Otelline recently in an official security filing - http://bits.blogs.nytimes.com/2009/03/25/intel-boss-says-sun-was-shopped-all-over/), Sun announced to the world that it doesn't have a sustainable business model. Who wants to buy from such a company?  Sun mostly lost money over the last couple of years and is especially hit hard by the recession since financial institutions are among its biggest customers.  That's why I believe Sun's problems are going to get worse.

Software accounts for maybe 10% of Sun's revenue (hard to tell since service revenues aren't broken down by hardware and software), so one can only hope Sun's software business (including Java) ends up in the right hands (I think IBM would have been a good place).

Piotr Kochanski replied on Mon, 2009/04/06 - 5:53am

It seems that SUN figure out finally how to monetize their software products. They give away everything for free (including high-end stuff like directory server), selling support for it. As a result barrier of entry is very low, in addition their support costs are by far smaller then IBM's, Oracle's, etc.

They have some pretty good ideas, like offering support for LAPM Stack - Sun GlassFish Web Stack. Given popularity of LAMP, together with reasonable pricing (it is resonable even for Polish standards, where people are reluctant to pay for support) that can become really profitable product. Netbeans start looking better and better with every realease, can't say the same about Eclipse, JEE Ganymede in particular.

SUN has just started pushing their software services, we will see if they succeed, maybe one day IBM would regret their stepping away from the deal.

As a developer and their software user I wish them good lack.

Karsten Silz replied on Mon, 2009/04/06 - 6:47am in response to: Piotr Kochanski

I agree with you that Sun software has got a lot better over the last couple of years, especially Netbeans and Glassfish.  However, for the survival of Sun as a business, the other 90% of their business need make a profit, or else it is all in vain.  Especially the hardware side needs to improve - it accounts for maybe 70% of all revenue and had revenues decline about 14% year-over-year in the last quarter.  I guess we have to wait for the next quarter results and see what happens when their layoffs are done.

Jacek Furmankiewicz replied on Mon, 2009/04/06 - 7:10am

I don't know...I was kinda looking forward to the deal. Looking at it purely from a Java developer's perspective, there is no way IBM could have done a worse job than Sun has in the last 2-3 years in terms of Java leadership.

Despite over a year of effort that has resulted in Java 7 being delayed and its feature set greatly reduced, applets are still flaky and no match to Flex or Silverlight, while JavaFX is quickly becoming history with zero adoption. Let's not even go into the whole fiasco with Java 6u10+ and OpenJDK being two significantly different forks and Sun treating Linux users as second-class customers at every turn.

The main reason Java has done as well as it has in the last 5 years is that the open source ecosystem (in particular the Apache and Eclipse teams) have stepped in and provided where Sun had fumbled. Anyone remember what Java IDEs or Swing used to look like before Eclipse and SWT arrived?

Let's face it, Sun just doesn't have the resources to keep Java up to speed with its competitors.  And despite its  huge commercial aspect, IBM seems to have a lot more clue about when and how open source can be used.

Jess Holle replied on Mon, 2009/04/06 - 7:50am in response to: Jacek Furmankiewicz

I don't know...I was kinda looking forward to the deal. Looking at it purely from a Java developer's perspective, there is no way IBM could have done a worse job than Sun has in the last 2-3 years in terms of Java leadership.

You've apparently not dealt with IBM's JVM, WebSphere, or AIX.

One could do a lot worse than what Sun has.

As for speed -- that's not something IBM is known for.  Their JVM, WebSphere, and AIX are all years behind everyone else.

Jacek Furmankiewicz replied on Mon, 2009/04/06 - 7:53am in response to: Jess Holle

Maybe. But at least there's a chance that Java could move to a more open style of development, which I think it badly needs at this point to catch up with some of its competition.

 

 

Guido Amabili replied on Mon, 2009/04/06 - 7:54am in response to: Jacek Furmankiewicz

Jacek,

Well, I started with JBuilder and Forte(a bit slow and buggy...) and they looked great from the start.....

Can't tell the same now that JBuilder got "eclipsed".....

Let's not discuss taste....

Guido

 

 

 

 

Clinton Begin replied on Mon, 2009/04/06 - 8:12am

 Sun has no excuse to fail. 

  • They still have the dominant enterprise platform (Java). 
  • They're making good headway into the JVM becoming a platform for modern languages (JRuby). 
  • They bought the world's most popular open source database (MySQL).
  • They still have a reasonably respected brand in the infrastructure space (to my surprise).
  • They have $2.7 Billion in CASH.

Now what they have to do is execute almost the exact same plan IBM would have:

  • Kill Sparc.  Please, the CPU in my laptop is more advanced.   Stop all investment.
  • Kill all non-commodity hardware projects (desktops, shipping containers...)
  • Stop paying money to compete with Open Source, just so you can say you're Open Source
  •     -- GPL OpenSolaris and donate the code to the Linux community, but otherwise let it die.  Stop all investment.
  •     -- Give away NetBeans to the open source community.  Stop all investment.
  •     -- Give away GlassFish .... stop all investment.
  •     -- Drop Open Office... it's a decent product, but not strategic to Sun at all.  
  • Fire James Gosling.  Time for the absentee Father of Java to go golfing.
  • Collapse the JCP.  The current design by committee approach of the JCP is killing Java
  • Stop trying to compete in every business.  
  • Stop writing specs and standards for things that don't need specs and standards.
  • Fire everyone related to the above.
Then...
  • Build the best Linux hardware in the business, sell it cheap.  
  • Find and hire a single technical lead for Java, preferrably someone who DOES NOT have an engineering degree, who has had a real job in the past, who can give it a single, clear direction.  Plenty of good choices out there (start with the Scala, Groovy and JRuby teams).
  • Use your own hardware to offer Java and MySQL hosting in virtualized grid/cloud infrastructure at commodity prices (i.e. starting at hobbyist prices 1 core x 1GB for $100 / month)
  • Work outward from there slowly.

Why does it take aquisition to do the right thing?

 Best of luck, Sun.

 Clinton

Clinton Begin replied on Mon, 2009/04/06 - 8:14am in response to: Clinton Begin

Forgot one major thing:

  •  Kill JavaFX... kill it with fire. 

Cheers,  :-)

Clinton

Jacek Furmankiewicz replied on Mon, 2009/04/06 - 8:17am in response to: Clinton Begin

+1

 

David Lee replied on Mon, 2009/04/06 - 8:58am in response to: David Gilbert

It's not sad, it's logical.  You can't give everything away for free and expect to make a lot of money. 

It's really a stupid strategy.  IBM, Oracle, Weblogic don't give everything away for free and they're all in pretty good shape.  Even Spring realized we can't give everything away for free and tried fiddlin' w/their license to drum up some revenue.

And as someone else noted, the geniuses at Sun went out and paid 1 billion for a database that brings in revenue of a few million per year and then you got people asking who owns the official branch.

Open source is ok, but open source & free(combined) is going to continue to be a problem for the profit seeking software industry.

 Newspapers!?

Karsten Silz replied on Mon, 2009/04/06 - 9:00am in response to: Clinton Begin

They have $2.7 Billion in CASH.

On Oct 9, 2008,  Sun supposedly had close to $3.5 billion in the bank (http://bits.blogs.nytimes.com/2008/10/09/sun-microsystems-a-lesson-in-failed-cosmetic-surgery/).  On Mar 18, 2009, there were only around $1.6 billion left (http://techpulse360.com/2009/03/18/ibm-to-buy-sun-microsystems/).  So in five months, Sun apparently burned through $1.9 billion in cash.   Even though this doesn't include everything they have on the books that they could turn into cash, at least it shows they don't have much time left for their turnaround.

David Lee replied on Mon, 2009/04/06 - 9:09am in response to: Clinton Begin

They should hire you.

Maurizio Turatti replied on Mon, 2009/04/06 - 9:15am

Actually Sun is moving most of the open-source development to both open communities and external partners, so the give-away has been started months ago. Many Sun employes left the company (most being RIFed) and they are improving products, also creating a business and making money out of it. At present I can see a growing interest from customers, as the low barrier for Sun sofware allows to start projects and then buy support and idemnification when needed, so usually when it is time to go into production. The opensource ecosystem created by Sun is getting traction, but it is hard to say if it will produce results too late for the company.

Sun is just too big and expensive for its present business, from my point of view it should aim to be the Apple of enterprise computing, Sun still has the brand but needs to decrease the internal burocratic decision chain a lot. I don't think that trying to compete for cheap Linux boxes with Dell or HP would be the right strategic move, also because they already own a better open source operating system than any Linux. It is like to say that Apple should adopt Windows just becuase is the most adopted o.s. Differentiation is key.

Richard Lowe replied on Mon, 2009/04/06 - 9:23am in response to: Clinton Begin

While I agree with alot of what you said some not so much. T2 and the Rock are the future for cloud computing if you want cheap comodity prices.  You have to invest in Open Source and Sun has and should. Sense when is a 9 to 10 billion dollar company a failure? This is corporate talk not business there is a difference. I think Sun is going in the right direction as some of your points have stated they can go faster. Seeing as how they are facturing Java with multiple languages anyway may as well free it completely IMO. Lot of good stuff coming out of Sun lately I for one would love to see it continue.

Jess Holle replied on Mon, 2009/04/06 - 9:43am in response to: Jacek Furmankiewicz

Maybe. But at least there's a chance that Java could move to a more open style of development, which I think it badly needs at this point to catch up with some of its competition.

Since when does IBM do much of anything with an "open style"?

Eclipse is kind of open.  I say "kind of" in that they only do commodity IDE features in Eclipse.  For the longest time they held all J2EE/JSP support in commercial modules and out of the free, open source ones until NetBeans' free and open support in this area pushed Eclipse to follow suit.  Thus Eclipse is kind of a shared commodity baseline upon which closed, proprietary solutions are built than NetBeans, which provides more capability in the open.  This is not to knock Eclipse overall, but it isn't a resounding statement of openness.

Apart from Eclipse IBM shows no openness apart from tiny Alphaworks nuggets.  How open is WebSphere? AIX? J9?  None of this is open in the slightest.  The lack of openness in IBM products makes them a real pain to troubleshoot, much less chase grander dreams like community collaboration.

Jess Holle replied on Mon, 2009/04/06 - 9:47am

I think what Sun is really missing is a strong, omnipresent, broad consulting arm like IBM's.  This is critical both to do complete, well-rounded enterprise deals and to make money off of open source offerings.  While I think that a lot of things would get a lot worse for those using Sun products if IBM purchased them, I think Sun or whoever buys them needs to get consulting strong and profitable or Sun's products just won't matter.

Fabrizio Giudici replied on Mon, 2009/04/06 - 9:53am

Well, the only lessons that I think we had in these two weeks is that we are engineers and don't understand how the finance runs. Period.I wouldn't dare to say things like the open source model failed, since it works for a lot of companies. It is also not clear whether the IBM deal is closed forever or it's just a tactical move - for me, now, I'll just keep an eye on the things and let how it goes on, eventually commenting about the future of this and that only when there are facts on the table.

Only a quick comment on this:

I don't know...I was kinda looking forward to the deal. Looking at it purely from a Java developer's perspective, there is no way IBM could have done a worse job than Sun has in the last 2-3 years in terms of Java leadership.

IBM hasn't got yet a version of WebSphere fully compliant with the latest JEE specs and old versions of WebSphere still in production are one of the major causes of Java 1.4 still floating around. 1.4! How can one think IBM would do a better leadership?

Jacek Furmankiewicz replied on Mon, 2009/04/06 - 10:08am in response to: Fabrizio Giudici

Would they waste a year on JavaFX (and fail to deliver for applets, Java 7 and arguably JavaFX itself)?

At least they *may* (I am not saying they would) creating an Eclipse-style foundation to manage Java, which would give it a better chance.

Karsten Silz replied on Mon, 2009/04/06 - 10:59am in response to: Fabrizio Giudici

IBM hasn't got yet a version of WebSphere fully compliant with the latest JEE specs [...]

WebSphere App Server has been JEE 5 compliant since last September: http://en.wikipedia.org/wiki/IBM_WebSphere_Application_Server#Version_7

Oracle / BEA and JBoss has also been very slow in adopting JEE 5, they probably didn't see a lot of demand from their customers.

Anthony Goubard replied on Mon, 2009/04/06 - 11:29am

Just a few points (from my POV): 

 - Sun bought MySQL for too much money.

 - JavaFX is a risky investment. 

 - When Jonathan Schwartz replaced Scott McNealy as CEO it was a sign that Sun is shifting its focus from hardware to software but the revenues didn't shift equally

 -  In crisis time hardware suffers the most

 - There is no Java 7 but Java 6u10 is worth a Java 6.5 and Java EE 6 is coming

 - If IBM would have bought Sun, the open source and Java investments would have been reduced

 - Sun can survive this crisis but they may need another reduction of costs especially on the hardware part

 - Sun is worth more than IBM was prepared to buy for

 - Companies profiting from Sun invovations should show their support to Sun (hey Google ;-))

 - Sun should find other source of revenues (Patent, push consultancy forward, rent Glassfish clouds with VPN, ...)

Coffee Jolts replied on Mon, 2009/04/06 - 11:28am in response to: Jacek Furmankiewicz

Agreed- JavaFX is an EPIC failure. Sun went out and created a new platform when what they really needed to do was improve Swing. The only thing I wanted from the whole JavaFX trainwreck was good audio / video support. Instead I got a scenegraph that couldn't do simple animation without tearing. EPIC fail.

 That said, I don't think IBM would be any better for desktop Java. 

Alessandro Santini replied on Mon, 2009/04/06 - 12:32pm in response to: Jess Holle

Flatly wrong. J9 outperforms Sun's JVM in many aspects.

I am dealing daily with AIX and WebSphere and really I cannot understand your concerns. I have seen literally hundreds of production environments with WebSphere, actually none with Glassfish.

Perhaps you are only worried of your free beers flying away <g>.

JeffS replied on Mon, 2009/04/06 - 12:47pm

I'm starting to wonder what all the vitriol against WebSphere is about.  Having never really used it myself (other than following some tutorials, and downloading Geronimo - which really isn't Websphere, but it's similar, apparently), I keep hearing other Java Devs, particularly here at JavaLobby, speak of Websphere as if working with it is hell on earth.

 Then I read posts such as yours, saying that it's fine.  I see these posts elsewhere, usually burried within all the vitriolic posts.  And these are posts (the positive ones) coming from people who are using WebSphere daily, and know what they're talking about it.

 My guess is that many people have briefly used WebSphere in older iterations, had a bad experience of some sort, and then bitched about it.  And then the negative feeling sort of snowballed in the blogosphere, and in message forums.

But some devs that use it daily just seem to "get on with it", and seem to think WebSphere is fine.

 Anyway, that was off topic.

Seems there are other acquisition rumors:

 http://www.channelregister.co.uk/2009/03/26/oracle_hp_joint_sun_deal/

Basically, Oracle buying software (Java, NetBeans, Glassfish, MySQL), and HP buying hardware.

Now we can speculate what Oracle would do with Java!  WooHoo!

Fabrizio Giudici replied on Mon, 2009/04/06 - 1:01pm

The vitriolic comments about WebSphere are from people dealing with them too, or from people regularly consulting for a number of customers, including those using IBM products. Of course, one can't tell details because of customers' privacy. My previous "IBM hasn't got..." sentence refers to hitting the market: I've never seen so far an installation of WS AS 7 so far - I'm not telling that there aren't, only that adoption is painfully slow. My statement about the 1.4 legacy is easily proved, at least in my context. While we are talking of innovation, this "speed" of adoption of new standards is unbearingly slow.

Alessandro Santini replied on Mon, 2009/04/06 - 1:06pm in response to: Fabrizio Giudici

Ciao Fabrizio,

WebSphere is fully J2EE 5 compliant (http://www-01.ibm.com/common/ssi/index.wss?DocURL=http://www-01.ibm.com/common/ssi/rep_ca/6/897/ENUS208-266/index.html&InfoType=AN&InfoSubType=CA&InfoDesc=Announcement+Letters&panelurl=index.wss%3F&paneltext=Announcement+letter+search).

I would like to highlight that Sun and the JCP are those who ruined J2EE - Spring has come out to address the large amount of deficiencies J2EE still has and the unreasonable amount of time and politics involved in taking decisions.

JeffS replied on Mon, 2009/04/06 - 1:20pm in response to: Alessandro Santini

Well that proves that WebSphere is JEE 5 compliant.  And that's a plus that it supports EJB 3 and JPA.  That alone makes it much easier to deal with.

Plus, last I checked, JBoss is not fully JEE 5 compliant (they've supported EJB 3 and JPA for a long time, but they don't have the full JEE 5 spec met).

Also, it took a little while for WebLogic and OAS a while to get up to JEE 5.

In other words, these big enterprise grade products from huge vendors tend to be slow moving in getting "latest features", as their customer base is quite conservative.

Guido Amabili replied on Mon, 2009/04/06 - 1:38pm in response to: Anthony Goubard

 

- Companies profiting from Sun invovations should show their support to Sun (hey Google ;-))

I would also add IBM to this list. They are milking the cow to death.....

 

 

cowwoc replied on Mon, 2009/04/06 - 2:30pm

Thank god. IBM would have been very bad for the Java community. Sun should team up with Google and support one another. A very big part of Google is built on top of Java (and Python) but there would be a lot of synergy between the two.

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