Sun And HP Agree To Expanded Partnership But What About A Merger? Here Are Some Key Synergies . . .

By Tom Foremski - February 24, 2009 HP-Sun.gif

Sun and Hewlett-Packard will detail a partnership agreement Wednesday morning. Could this be a step towards a merger? I've long said that there are strong synergies between the two companies but they are held apart by different cultures.

A merged HP and Sun would make a stronger competitor against IBM. It would create a West Coast versus East Coast rivalry that could unite the two cultures against a common enemy.

+HP would get Sun’s range of SPARC systems and an impressive future technology road map for SPARC microprocessors. This is a great challenger to IBM and its proprietary 64-bit Power microprocessor architecture. Margins on proprietary hardware are four to five times better than on industry-standard systems.

+HP would gain from Sun’s large accounts in financial services and telecoms. These sectors are huge IT spenders.

+Sun needs a much stronger services arm, and HP has a strong IT services group.

+HP would gain Sun’s middleware, v.important against IBM’s WebSphere middleware. Middleware software has a very high profit margin.

+Both companies could consolidate their computer labs.

+Sun’s Java technologies have consumer electronics and mobile phone applications and momentum.

+Both have strong datacenter technologies. They could dominate cloud computing.

There's more . . .


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Comments (2)

Fascinating idea. It makes sense from a technology/product point of view. But what about culture? Do you think the two companies are compatible? In my experience, that’s the intangible that is often overlooked when the executives are making strategic decisions, and often the difference plays a key role in a failing M&A. There are several cases, US Robotics and 3Com, for example. Old enough to not risk upsetting anyone. But there are more recent ones too.


Tom Foremski:

Luca: Yes, you are right, the culture is the largest obstacle. But having a common enemy in IBM does wonders in uniting cultures. And these are two very dynamic and aggressive cultures, I think they could do very well together.


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