Congratulations to all of my friends at StorageTek on the announcement that Sun Microsystems is buying the company for a cool $4.1 billion dollars.
This is an interesting, albeit somewhat puzzling strategic move for Sun too, as Storage Technology Corp. (the formal name, though everyone here in Colorado calls it StorageTek) is focused on data storage issues, an area that hasn’t been much of a strategic focus for Sun as it’s retooled itself with Solaris 10 to move into the open source future.
It’s a bit jargon-filled, but here’s the StorageTek vision statement from their site:
Vision statement: Be the storage experts who deliver easy-to-use, industry-leading, innovative storage solutions to manage and protect business critical information.
A typical StorageTek product is the FlexLine FLC200 Disk Array, which offers up to 250GB of space in a 14-drive unit. This type of drive is perfect for data center backup uses or similar applications. Not glamorous, but StorageTek is one of a handful of companies that supply the disk drives and disk drive arrays used in modern computers and computing facilities.
If you’re thinking commodity, you’d be right. StorageTek has had a rough go of things in the last few years as the disk drive business has evolved into a completely commoditized business segment. It’s not about MTBF (mean time between failures) any more, it’s about size, speed and, mostly, cost.
But why would Sun Microsystems buy them? Until a few years ago, Sun’s push was to sell its SPARC-based servers into data centers, with its powerful (but proprietary) Solaris operating system as an integral part of the package. Yes, The Network Is the Computer as Sun’s flamboyant CEO Scott McNealy famously coined, but as the technical community moved towards the world of open source, Sun stuck with its proprietary solutions (in a grand irony, since Sun engineers really helped create the modern open Unix operating systems).
It wasn’t until a few years ago that Sun abandoned its proprietary windowing environment, for example, in favor of the already industry standard GNOME windowing system, and it wasn’t until recently, the jump from Solaris 9 to Solaris 10, that Sun actively embraced the world of Open Source. Today you can download the Solaris 10 operating system from Sun’s web site, and it’s a credible, albeit niche player in the open source community. It’s not Linux, but it’s an interesting alternative operating system.
Sun continues to promote itself as a provider of “network computing infrastructure solutions”, but its latest 10Q filing notes that “Our Products net revenue was unfavorably impacted by competition and a continuing market shift in overall computer system demand away from our data center servers towards the usage of enterprise and entry level servers.”
Hopefully this new acquisition will be viewed in the industry as a move where Sun will be able to regain some of its lost ground in data centers with a new, more competitive product. But I’m skeptical. Consider recent computer industry events: Hewlett-Packard disastrously acquires commodity manufacturer Compaq and finds it does not help their competitive position, while IBM sells off its own commodity business, personal computers, as Lenovo, so it can focus on its value added services.
I’m not the only analyst who thinks Sun has been flailing around, trying to find a single arrowhead behind which the company can form in the last few years either. The Wall Street Journal report on the acquisition notes that Sun “continues to struggle after the collapse of the Internet boom”.
I wish the acquisition well, and am certainly heartened at the benefit for the many Colorado-based StorageTek employees, but I’m still going to be watching with interest to see how Sun folds the StorageTek product line into its own, and how Sun will position itself in an industry that has been laid bare by commoditization, by the increasing pervasiveness of cheap commodity hardware stitched together by free, open source software and systems.
Make no mistake, this is an epic struggle, and it’s no accident that most of the biggest Unix server players have now moved into services as a way to survive in this new, tougher market. But commoditization changes the business ecosystem irreversibly, and its how nimbly companies respond to this change that will determine who are the winners in the 21st century.
More thoughts on the acquisition and its import for Colorado: VC Brad Feld and New West columnist Richard Martin.