Sun to Buy StorageTek

UPDATED: Sun Microsystems took great steps to fortify its information lifecycle management (ILM) strategy today by agreeing to acquire Storage Technology for $4.1 billion in cash.

The move should plug any holes in Sun’s storage portfolio, improving the Santa Clara, Calif., company’s ability to manage information from the time it is created until it is ready to be destroyed. This is the hallmark of ILM.

Both companies have comprehensive storage portfolios, as well as several blue-chip customers, making the deal a synergistic fit. Sun also resells StorageTek products under its own StorEdge brand in a long-standing original equipment manufacturer (OEM) deal. The companies have
worked together in some capacity for 10 years.

Sun sells storage arrays and software to manage them. StorageTek offers several tape libraries, tape and disk drives and storage resource management software to protect and archive data to complement Sun’s larger systems.

The market for storage hardware and software is poised for growth in the
wake of events that precipitated increased disaster-recovery purchases and
products that help corporations meet government compliance regulations, such as
Sarbanes-Oxley and HIPAA.

Sun CEO Scott McNealy confirmed as much on a conference call Thursday,
noting that managing companies’ critical data assets was increasingly
becoming an important component of solving network computing problems.

“As we worked with them over the years, it became apparent that there is a
very interesting alignment in terms of vision around network storage and
information lifecycle strategies between the two companies,” McNealy said.
“This combination takes us to a whole new level of scale and scope on a
global basis. It puts over 1,000 new sales reps into the market for us.”

McNealy also nodded to StorageTek’s tape storage perks, noting that “36
percent of the archived data on the planet is on StorageTek equipment, and
this is up to five times more cost effective than archiving on disk, so this
is something that really matters to reducing complexity and lowering the cost in
the enterprise environment.”

The purchase is further proof that Sun is dead serious about ratcheting up
its position in the storage sector, where it has lagged behind rivals like
IBM and HP. Should the deal succeed, Sun would be significantly more
equipped to take on its competitors in the red-hot storage market.

Pund-IT Research analyst Charles King said Sun can now position itself as a
full storage systems vendor, which is a departure from when Sun only had
storage bits and pieces to tempt customers with. Sun will also be able to
leverage StorageTek’s broad client base, he said.

“They have HDS’ high-end disk and now they’ve got StorageTek in the
mid-range, plus StorageTek’s storage management software and ILM stuff,”
King said. “After they get everything integrated, they can believably go out
and say they’re an end-to-end systems vendor. I don’t think they could
before.”

Under the terms of the deal, StorageTek stockholders will receive $37 per
share in cash for each StorageTek share for an aggregate value of $4.1
billion, including the assumption of employee stock options.

The companies expect the deal to close late summer or early fall 2005.

Upon the closing, StorageTek and its more than 7,000 employees will be
tucked into Sun’s network storage division, led by Sun executive vice
president Mark Canepa. This will include a merged price list, with little
change to either companies’ roadmaps, according to McNealy.

“Customers will be thrilled to death at the increased scale, scope and mass
the two companies together can put forward,” McNealy said.

In the meantime, a team with representatives from both companies will discuss
how to integrate the two giants. Updates about the integration and where
StorageTek’s current management team will be dispersed within Sun and will be
announced in the next 60 to 90 days, said Sun vice president James Whitemore.

Whitemore also said that after the integration, users should still be able
to distinguish StorageTek’s pedigree in tape, automation and archiving
technology from Sun’s technology bank.

Clint Boulton
Clint Boulton is an Enterprise Storage Forum contributor and a senior writer for CIO.com covering IT leadership, the CIO role, and digital transformation.

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