IBM-Sun Merger Called Anticompetitive - InformationWeek

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IBM-Sun Merger Called Anticompetitive

Industry group claims a Big Blue takeover of Sun would result in fewer choices and higher prices in the IT market.

A tech industry group largely made up of IBM rivals says a merger between Big Blue and Sun Microsystems would be harmful to competition in the IT industry and lead to higher prices for software and hardware.

"If this merger is announced, it will require careful, extensive review by antitrust authorities because of the wide range of products both companies now produce," said Ed Black, CEO of the Computer & Communications Industry Association, in a statement.

CCIA is a D.C.-based lobby group whose member includes Microsoft, Google, and Advanced Micro Devices, as well as mainframe maker T3 Technologies.

Black said that an IBM takeout of Sun would reduce consumer choice and hit buyers of IT equipment in the pocketbook. "IBM and Sun have been fierce competitors for years. A merger would eliminate a key competitor, which affects choices and prices down the line on numerous IT products," said Black.

Sun and IBM are both significant players in the market for servers and business software. CCIA noted that European authorities are investigating IBM for possible antitrust violations in the market for mainframe systems.

The Wall Street Journal and New York Times reported Wednesday that IBM and Sun were in talks over a possible $6.5 billion acquisition deal. Investors pushed up Sun's stock price by almost 80% on word of the negotiations.

An IBM spokesman dismissed the reports as rumor but didn't deny the speculation outright. "All I can tell you is that we don't comment on rumors," said the spokesman. Sun representatives did not respond to a call seeking comment.

Sun's proprietary hardware business has all but dried up in the face of competition from commodity players such as Intel and Dell, and it's struggling to keep pace with larger players in the software business, such as Oracle, Microsoft, and IBM itself.

Yet the company retains key, widely-used assets, including the Solaris operating system, the open source MySQL database -- which boasts more than 11 million installations -- and the Java programming language. "Java would factor hugely in IBM's interest in Sun," said Allan Krans, an analyst at research firm Technology Business Research.

IBM doesn't charge for open source software directly, instead bundling it with lucrative services and consulting engagements. The business model represents a threat to pure play software vendors like Microsoft and Oracle. Adding Sun to the mix would serve to extend IBM's dominance in the market for so-called middleware that businesses use to connect a vast range of computing devices.

IBM's net income jumped 12% in the most recent fourth quarter, to $4.43 billion.

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