The Sun Shines on StorageTek
StorageTek employs just over 7,000 folks and posted revenues of $2.2 billion last year. In terms of financial performance, StorageTek is a tortoise not a hare. It has posted 4 years of steady growth. But nothing spectacular.
So, is this a wise deal?
Well, there are a lot of ways to look at it. First of all, Sun already had an OEM arrangement with StorageTek. So, acquiring the company doesn't really bring Sun anything it couldn't already have sold to its customers. Yes, I suppose owning the technology is different than just re-selling it. But what is the benefit to Sun's shareholders?
Furthermore, as a customer of either Sun or StorageTek, does it make much difference whether the technology you buy is owned by Sun or StorageTek? Maybe a case can be made that the StorageTek technology has a better chance for longer life under the Sun umbrella. So a customer might be more inclined to buy storage from Sun than from StorageTek when the competition is EMC and HDS. But I'm not sure that is a strong argument for Sun to shell out $4.1 billion.
In the wake of this acquisition, I guess one thing is absolutely certain: Sun is committing to the storage market. You don't write such a large check without a strong commitment. So it appears that Sun is intent on competing with the storage big boys. This acquisition gives Sun a dedicated storage sales force, as well as storage services offerings.
For customers, the big question is "Will Sun keep the StorageTek technology generic?" In other words, if you are a StorageTek customer who does not use Sun servers, you are hoping that Sun will continue to support other servers with its new storage stuff. I think it is a safe bet that Sun will do just that. There is no reason to chop off support for other servers within the storage product line. The only valid reason to try that would be if Sun felt that the StorageTek product line was strong enough that it would compel others to switch to Sun servers. And that is not very likely at all. So, assume that the status quo will continue for the StorageTek products under Sun management.
I guess tech companies just have the urge to merge. But remember, there really is no such thing as a merger. All mergers are really acquisitions - where one company comes out on top. This is an acquisiton of StorageTek by Sun. If you are a Sun customer, I don't think there is any reason to rush a switch of your storage hardware to Sun's StorageTek product line; of course, there is no reason to not consider them along with the other players. And if you are a StorageTek customer, it is time to talk to Sun to get a commitment from them to continue to support StorageTek's existing platforms. If you can get that, then there is really no reason to consider switching to another storage provider.
© 2005, Mullins Consulting, Inc.
