What if IBM bought Sun Microsystems?

So far, there's no confirmation of reports that IBM is in talks to acquire Sun Microsystems, but there's plenty of speculation about the possible impact of such a move and IBM's motives behind it.
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"This proposed acquisition appears to be mostly about the hardware, which is about 45 percent of Sun's revenue," said Roger Burkhardt, a former IBM executive and now CEO of Ingres, a California-based provider of open-source database management software and support services.

But while it's true that Sun is a major player in the mainframe business, it also has some key software assets, such as the Java programming language. Controlling Java would give IBM a major advantage over its competitors in the services and software market, which generated 79 percent of Big Blue's revenue in 2008.

Burkhardt, whose company competes with Big Blue, believes that revenue stream will slow to a trickle as the economy declines.

"It's based on the notion that the customer has to pay big upfront license fees out of their capital budget before getting any kind of value out of the software," Burkhart said. "We believe this economy will drive people to buy software on a subscription basis ... under a model where you don't have to pay a big multimillion dollar upfront license fee before you know whether it's going to give you any sort of value."

Not surprisingly, all of Ingres' software is offered on a subscription model.

"You buy a service subscription, we provide maintenance and support for it," Burkhart said. "And people pay according to how much they're using it."

It's hard to argue with anything IBM has been doing, considering its staggering profits during a time when so many companies are struggling just to stay afloat. But Ingres, which employs 300, is doing quite well itself.

"We've grown from $26 million in revenue in 2006, when the company was formed, to $68 million last year," Burkhardt said. "We and the other open-source companies are definitely gaining share because that old licensing model is really broken, and people can't afford to pay for that broken model anymore."

All that aside, the big question in the Hudson Valley is what impact an IBM takeover of Sun would have on jobs.

"We know generally when this stuff happens, there are job cuts," said Lee Conrad, national coordinator for union-backed Alliance@IBM. "Anytime something like this happens, the executives and the stockholders make out, and the employees lose."

Ingres CFO Tom Berquist, a former Goldman Sachs analyst who covered large-cap software companies, believes more jobs will be lost at Sun than at IBM.

"The big question mark is about the sales force," he said. "Sometimes, companies take the best salespeople out of the acquired entity and keep them, and release some of their own salespeople."

Christine Young covers IBM. She can be reached at 346-3140 or cyoung@th-record.com. IBM Notebook appears Mondays.

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BY Christine Young
Source：TIMES HERALD-RECORD

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