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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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Jacek Furmankiewicz replied on Mon, 2009/04/06 - 2:36pm in response to: cowwoc

Yeah, that would be the dream acquisition...but Google is not into the hardware business at all, so that part of Sun is of no use to them whatsoever...

Alessandro Santini replied on Mon, 2009/04/06 - 2:51pm

@ cowwoc - besides repeating "Thank god. IBM would have been very bad for the Java community. " could you please elaborate? @ Jacek: perhaps it is, however I would like to see their objectives with acquiring Sun first. Who said they will keep it open? Who said they will maintain the JCP? These are only suppositions, IMHO.

Bruno Sanz replied on Mon, 2009/04/06 - 4:55pm

Maybe sun could get divided into 2 companies. One for software and one about hardware. Java can have future...their hardware...maybe not

Michael Parmeley replied on Mon, 2009/04/06 - 10:30pm in response to: Jacek Furmankiewicz

Anyone remember what Java IDEs or Swing used to look like before Eclipse and SWT arrived?

 Java IDE's looked like IntelliJ  and Swing looked just fine. I personally think SWT looks like crap and therefore Eclipse looks like crap.

 

There really is nothing wrong with the looks of Swing and there are plenty of look and feels available for it if you want it to look different.

Thierry Milard replied on Tue, 2009/04/07 - 3:48am in response to: Anthony Goubard

Good comment Anthony.

I also think on the java side, sun has been (at last) moving on. (big) Mistakes has done in the past (2005, 2006,2007) but since mid 2008 we see concrete result from Sun. Upgrade we can see, test and agree about. We developpers and users. This is good.

java 1.6.0 update  10,13, 14, .... have been a major good move. versions after version I really think a light quick and beautifull is coming. Of course I do agree the BIG mistake was to wait perhaps 3 years to do this. It perhaps hurt javaFx a lot on version 1.0 .

We will see at the end of 2009 if some neet and cool Web service are coming out of this change. I would bet yes (... but I do agree I not noutral on this ;) )

Mike P(Okidoky) replied on Tue, 2009/04/07 - 11:38am

$0.15 and the deal is off? Wauw, that's fragile and sensitive. If I was to be rewarded $10,000,000 and I had to settle for $9,842,931.94 I'd take it.

If it wasn't for Google (and IBM), I don't think there is a single other company worthy of buying Sun.

As for Google, although it's all very cool and everything, I think they would bastardize Java in no time flat. I mean, look at Android.

Clint Grimsley replied on Tue, 2009/04/07 - 5:17pm

0.15 at 744.71M shares = $111,706,500

Whilst you might take it, the rest of the chicken littles on Wall Street have no problem freaking out when Schwartz stubs his toe. The paultry 160,000 difference becomes much larger and in these cases have to be handled delicately.

The ensuing panic caused the fall of JAVA from 8.5ish to 6.0ish a share over the weekend, which equals a much larger number, like $1,861,775,000 that would have been going into Sun employees paychecks, and instead is being used to write their pink slips.

Sort of like this

The bull / bear analogy? It's all stampedes and finicky animals.

cowwoc replied on Tue, 2009/04/07 - 10:39pm

@Alessandro

 As a former user of IBM technologies for many years I will attest to the following experiences:

- IBM has killed every single company it has purchased. If you look at their track records of corporate acquisitions they caused more good businesses to die than make them successful. People are claiming that IBM will "rescue" Sun but history points very much in the opposite direction. Whatever Sun is doing badly from a end-user point of view, IBM is even worse.

- IBM has a horrible record with respect to community development. Ever try reporting bugs to IBM? Eclipse is a tiny blip in a long history of IBM treating its users very badly.

- IBM has a history almost as bad as Sun when it comes to user interfaces. At least Sun has been improving recently. IBM still acts like a dinosaur, selling to enterprises not to individuals.

- IBM makes money by selling support services. It is in their best interest to put out software that is hard to use, and it shows. None of their software is innovative with respect to ease-of-use. Sun made many positive strides in this direction.

 

IBM does one thing well that Sun does not: make money. But I'd argue that Sun doesn't need to become IBM to become profitable. There are plenty of great companies Sun could ally with to improve their business position and kick some major ass. Sun has plenty of great assets. As other users have pointed out they could do something as simply as offering Sun-managed Glassfish servers to corporations. They have a bunch of great expertise (who knows Java and Glassfish better than Sun itself? No-one). All they need to do is find ways to monetize it. If Sun offers innovative services related to their products (not old-school support) they can position themselves in a way others cannot compete. Here are some ideas I've read from other users:

 

1) Develop Java for free, but also let the community "fund" specific features it wants to see sooner. Once enough money is collected, Sun begins development.

2) Offer Sun-hosted services such as Glassfish, a Java-based grid (Terracotta), etc. Businesses will pay Sun to make their software scale. You can either trust this to generic grid services like Amazon or to the company who invented Java in the first place. Who do you think businesses will flock to?

3) Everyone and their grandmother wants to develop cell phone applications. Java owns most of this market. Couldn't they offer support contracts across all phone models? You can either pay cell phone manufacturers for awful support or pay Sun. Have you ever tried developing using online discussion forums? They suck. Companies would pay big money to help their developpers double their productivity. You know how much time is spent Googling forums for workarounds to JVM bugs? If Sun were to port their JVMs to this platform, guarantee stability, and offer support they could make serious cash.

 

Anyway, I am pulling this out of my head. I am by no means a business expert. All this goes to say that Sun doesn't need IBM to make money. I think Sun could be very successful if it regains some small-company mentality (versus what IBM would give them). Small-companies are agile. They claw their way out of bad places and make it to the top. Sun needs to regain its focus.

Jeroen Wenting replied on Thu, 2009/04/09 - 8:37am

my experience with IBM exactly cowoc, as someone who worked for one of those companies destroyed by IBM after buying them as well as a regular user (often involuntarilly) of quite a few of their products.

Carl Dea replied on Sat, 2009/04/11 - 4:05pm in response to: Alessandro Santini

Alessandro,

With biases aside. The anouncement reads "IBM United States Software Announcement 208-266
September 09, 2008"

That's 6-7 months ago. On the east coast that's bleeding edge or maybe cutting edge.

Many Gov't facilities, Health facilities, and banks use mainframe systems which are serviced by IBM and many have just moved to 1.4 JVM. I've worked in this industry for a number of years (and still know friends who work at various agencies). They move cautiously or slow depending on who you are (a gov'y or consultant). I still know many agencies that use WebSphere Application Server for z/OS (zWAS). I can definitely tell you that they do not use JEE 1.5 or EJB 3.0! Changing JVMs basically takes an act of congress. In 2006 they moved from Java 1.3 to 1.4.1 (not even 1.4.2)!

I'm kinda glad this deal wasn't made. Too many overlapping technologies between the two companies. IBM often gives me the impression of vendor lock. Find one customer using Websphere truly capable of taking an *.ear file and converting it to an Oracle or Glassfish server solution. For starters, managers will never switch app servers because..., and many developers know it's not easy (jca, jta, sso auth, deployment, tcl scripts, etc.). Being compliant and using zWAS&WasIDE are totally different. The IDE(Eclipse based wsad) is pretty cool though, but once you get to liking it you won't be able to replicate the dev environment with Eclipse and many pluggins. That's exactly the business model that they are imposing.  Lots of money goes to Apache and Eclipse from IBM. (IBM strategies).

Sun should maybe create an army of consultants that can help create great JEE/JavaFX/Swing solutions even if it means using other languages and frameworks like Spring, Struts, Ror or Python. Sun has great software they just have to make money from their offerings. Sun built an awesome community and sw platform ecosystem, and many folks seem indifferent about it.

There was a time when folks thought Apple would go belly up and look at them now.

I think Sun will do something spectacular and change the tone.

 

-Carl

 

 

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