Sun Microsystems buys StorageTek
In a $4.1 billion deal, US computer maker Sun Microsystems announced it will buy out US tape and disk storage company Storage Technology (StorageTek). Sun is already a leader in software for managing servers and storage systems, hence the fit.
Sun, which has lots of cash on hand (over $7 billion) is looking for a way to keep growing, now that its specialized workstations and servers are in less demand. One growth area in the computer hardware field is in data storage, as companies keep expanding their digital storage needs for increased archiving ad data sharing needs. Federal regulations on corporate data retention and the expansion of e-mail are contributing factors. According to a Wall Street Journal article ("Sun Microsystems To Buy StorageTek For $4.1 Billion", 1/3/2005, the market for disk drives is Over $113 billion with a growth rate of 10% per year. The tape market, at around $5 billion, is only growing at 1-2% a year.
The acquisition, Sun's largest ever, has many analysts scratching their heads, Sun CEO Scott McNealy once quipped that the 2002 merger of computer maker and rivals Hewlett Packard and Compaq was like a "collision between two garbage trucks," is subject to similar sniping. Sun has blunder before, with the $2 billion purchase in 2000 purchase of small-company server maker Cobalt Systems, a product line Sun dropped a few years later.
Critics don't see much sustainable growth for Sun in the purchase. Gross income for StorageTek is in the $2 billion range and but net income is under $200 million. Plus HP, a major StorageTek customer, may find another source for storage units other than its rival Sun. In the storage solutions area, Sun faces tough competition from EMC and IBM. There may be some profound reasoning here, but it looks like a panic move by a company that sees its revenues stagnating and hopes to acquire its way out of the problem.
5:08:24 PM 
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