The Wall Street Journal reported today that IBM is in talks to acquire one of its arch-rivals in the server space, Sun Microsystems.
There are a lot of reasons why IBM would be interested in Sun. The server business is obviously Sun's biggest business, and it would benefit IBM to expand in this area by taking out a rival (Sun), growing against a large rival (HP), and positioning against a new entrant (Cisco, more on them in a moment). Additionally, one of Oracle's largest hardware platforms for their DBMS is Sun, so if IBM acquires Sun it could give them some leverage in dealing with Oracle. Although IBM has a version of DB2 that runs on Sun/Solaris, it has not been widely accepted. IBM's Informix has a bigger footprint on Sun than does DB2.
Sun has also been busy offering cloud computing and storage offerings, which is something that IBM has not yet pursued. Acquiring Sun would offer IBM a shortcut into that business.
But if you look past the server side of the equation, Sun offers some interesting technology/hardware/software that IBM is probably very interested in. A couple years ago Sun bought StorageTek and IBM's very healthy storage business would be happy to add Sun's storage business. Last year Sun bought MySQL, and IBM's data management group would be very happy to add the number one open source DBMS to its line of offerings. IBM tried to enter the open source DBMS fray a couple years ago with its Derby/Cloudscape offering, but it has not been very successful. And let's not forget than Sun created Java and IBM would be happy to add that feather to its software cap.
The bottom line will be the price: how cheaply can IBM snag Sun? If the price is right, the deal will get done and it could be a very good one for IBM overall. But a lot of the benefits from buying Sun would be in how the various pieces interact under one roof, and we all know that IBM is not the most adept company at getting its operating units to function in sync with one another.
And what about Cisco entering the server business? Ill-advised, in my opinion. Cisco partners with all of the server providers to sell its networking hardware. Does Cisco really want to take the risk that HP and IBM would get irked at them for competing in the server business (no matter what the public stance of the companies) and have them more aggressively partner with a Cisco competitor (e.g. Citrix)? And even if you look at it from just an internal Cisco perspective, the server business is a mature market with very large incumbent players. How many Cisco customers would rather have a server from a brand new player (Cisco) rather than an entrenched, solid company like IBM or HP? Some, perhaps, but I doubt enough to make Cisco a credible player in this market.
I guess we'll just have to keep our eyes on these events to see what transpires.