But Wait, There's More

Sun's Schwartz Dreams Big About Buying Big Blue's Server Biz

After giving a speech last week at the Securities Industry Association Technology Management Conference, Jonathan Schwartz, Sun Microsystems's president and chief operating officer, said something so silly that had I been actually drinking coffee when I read the report in Red Herring, the coffee would have come out my nose or I would have spit it across the room involuntarily. Lucky for me, I had already had the morning coffee when I read that Schwartz--presumably as a big joke, but you can't tell with his dry humor--said Sun was still on an acquisition binge and that, get this, Sun was interested in buying IBM's server business.

With what, Jon? Bill Gates' money? The gross domestic product of a small European country?

Let's think about this for a second, just for fun. Nearly all of IBM's revenue is derived directly or indirectly--and mostly indirectly--from its server business. Big Blue sold off its disk drive and PC businesses recently and has long since ditched its printer, terminal, networking, and application software units. The vast majority of IBM's middleware and operating system sales come from its own server lines, although Big Blue does sell software on other people's iron, particularly in the Linux and Windows markets, sometimes in the Unix space. Ditto for services: the majority of IBM's services revenues is on IBM iron, but a larger percentage of services have to do with integrating disparate systems, to be fair, or providing services that are not tied specifically to any piece of iron or architecture. Still, most of the value of IBM's $121 billion market capitalization comes from--again, either directly or indirectly--its server business. It is hard to imagine IBM not having a value of at least $250 billion in any acquisition--if not more. And Sun, which has one-tenth of the market cap of IBM and only a few billion bucks in cash, has no way of acquiring even a piece of IBM's server business. Period.

What Sun needs to acquire is a line, and then place it on the floor, and then teach Schwartz not to step over it when he speaks. While Schwartz has talked up a large number of good ideas in his short tenure as the number two exec at Sun, this idea is just plain laughable.

IBM Appoints New Head of iSeries Sales

Just as the United States was heading into the July 4th holiday, IBM announced it has appointed a new head of worldwide sales for the iSeries line. Bob McCormack, who has held that position since April 2001, is moving over to IBM's channel sales organization and has been tapped to be vice president of channels for IBM's SMB channel. McCormack started out as a marketing rep for IBM in the Columbus, Ohio, offices of Big Blue back in 1977, eventually becoming manager of large systems marketing in Detroit. He then held various sales and marketing jobs in IBM's channels organizations, which is why he was tapped to be head of sales for the iSeries. The iSeries, as we all know, is predominantly sold through IBM's channel partners.

Bill Donohue is the new vice president of worldwide iSeries sales, and he reported to work on July 1 to iSeries general manager Mark Shearer. Donohue joined IBM's sales force in 1981 and has held various positions in the SMB and channel areas. Since 2001, Donohue has been in charge of pSeries Unix server sales in the Americas region, so he knows a thing or two about growing a business. Of course, growing IBM's Unix server business between 2001 and 2005 was a challenge, but made significantly easier by the excellent RISC server hardware and wickedly aggressive pricing IBM delivered compared to its Unix competitors throughout this time. Growing the iSeries will probably be a bit more challenging, but the good news is that the iSeries has that same RISC server hardware and the rugged i5/OS platform. Anyone who helped IBM become a contender in Unix servers and grow sales for 12 consecutive quarters knows a lot of things that can help the iSeries cause.

Giovanni Perotti, Creator of Easy/400, Leaves IBM

While Mel Rothman of IBM's Rochester Labs created the CGIDEV2 tools for bringing OS/400 applications to the Web, Giovanni Perotti, of IBM Italy, was instrumental in launching the Easy400 Web site to show companies how to deploy this software and to provide the open source version of the CGIDEV2 code to let them contribute to the future development of the tools.

After 39 years at IBM, Perotti announced at the end of June that he would be retiring from the company. The large number of Easy400 users expressed their gratitude for all that he has done to try to promote the idea of easy Web programming for the OS/400 platform. And Perotti even left the door open, explaining that he may "decide to perform some professional activity of my own." He added that he would continue to support Easy400 users free of charge and told everyone that the Easy400 Web site would continue even in his absence. The Yahoo user group and forum for the tool is still active, too.

While IBM has allowed CGIDEV2 and the Easy400 extensions to be distributed as source code free of charge, Big Blue might want to think about going the next step and putting Easy400 out there in the open source community in a formal way and assigning the rights to the code to that community. Easy400 can probably stand in its own two feet at this point. If IBM is willing to do this, I have some iron and bandwidth that I am willing to donate to give it a home.

Java Coders Like Open Source Software

Other survey results, which were compiled by Evans Data, show Microsoft's .NET has established a slight lead over Java in the overall development space, but that situation reverses in the enterprise space, with 60 percent of the development taking place in Java compared to 56 percent in .NET.

Enterprise Management Software Market Grows 11.4 Percent to $6.2 Billion

The enterprise management software market, where the customers are a Who's Who of corporate high rollers, turned in a winning parlay ticket of double digit growth in 2004, according to an accounting of license revenue figures recently completed by Gartner. The analyst firm concluded the market grew 11.4 percent to $6.2 billion.

The top vendor in this field--for the fourth consecutive year--was IBM, which registered 7.5 percent growth and reached $2 billion in revenue. Gartner also ranked IBM as the leader across enterprise management market categories including availability and performance management, configuration management, database management, job scheduling, and network management, plus a general category that includes print management. IBM covers this market with its Tivoli software suite of products.

Oracle Numbers On the Up Despite PeopleSoft Merger Costs

Based on its fourth quarter financial numbers, it appears Oracle's new diet of PeopleSoft customers has helped add muscle to the IT heavyweight. In the first full quarter after the PeopleSoft acquisition, Oracle reported GAAP total software revenues were up 24 percent to $3.12 billion while non-GAAP total software revenues were up 31 percent to $3.30 billion. GAAP database and middleware new license revenues were up 16 percent to $1.26 billion for the quarter, while GAAP applications new license revenues were up 52 percent to $350 million. GAAP services revenues were up 35 percent to $755 million.

GAAP earnings per share in fiscal 2005 Q4 were up 4 percent to $0.20, and non-GAAP earnings per share were up 36 percent to $0.26. GAAP net income for the quarter was up 3 percent to $1.02 billion, while non-GAAP net income grew 35 percent to $1.36 billion. GAAP revenues were up 26 percent to $3.88 billion while non-GAAP revenues were up 32 percent to $4.06 billion for the quarter.

Oracle CEO, Larry Ellison boasted that his company's strong growth backs up the latest Gartner, IDC, and Morgan Stanley database surveys that show Oracle is increasing database market share while IBM's DB2 database is in decline.

For the fiscal year 2005, Oracle's GAAP earnings per share increased 10 percent to $0.55, and non-GAAP earnings per share increased 31 percent to $0.68. GAAP net income was up 8 percent to $ 2.9 billion, while non-GAAP net income grew 29 percent to $3.5 billion. GAAP revenue was up 16 percent to $11.8 billion, while non-GAAP revenue was up 19 percent to $12.1 billion.

Fiscal year 2005 GAAP software revenues were up 17 percent to $9.4 billion while non-GAAP software revenues were up 21 percent to $9.7 billion. GAAP database and middleware new license sales were up 13 percent to $3.3 billion, and GAAP applications new license revenues were up 28 percent to $785 million. GAAP service revenues were up 14 percent to $2.4 billion.

Microsoft Settles OS/2 Antitrust Lawsuit with IBM for $850 Million

Microsoft has doled out billions of dollars to resolve antitrust claims, and just as we were going to press before the July 4th holiday, it was IBM's turn to pocket some of that monopoly money. After fighting almost 10 years to settle an antitrust conflict, Microsoft has agreed to pay IBM $775 million and extend $75 million in Microsoft software credit to IBM.

IBM has followed numerous other Microsoft rivals to this honey hole. Just in the past two years the list of companies and their payoffs include: Time Warner, $750 million; Sun Microsystems, $1.95 billion; Novell, $536 million; Burst.com, $60 million; and Gateway, $150 million.

The IBM antitrust claims were based on IBM's contention that Microsoft charged IBM higher prices because IBM continued to peddle the jointly developed OS/2 platform (which Microsoft and IBM created for PC servers) against Microsoft's desires after it launched Windows NT. Gateway's claim against Microsoft was based on a similar pricing discrimination. The IBM settlement also includes the resolution of all other antitrust claims IBM has against Microsoft, including those related to OS/2 and IBM's SmartSuite products. It did not, however, extinguish IBM's right to press claims that its server business was harmed by Microsoft practices. IBM did agreed that it would not seek damages for actions that occurred before mid-2002, which makes any server business claim seem unlikely.