Dell says IBM-Sun talk creates business opportunity Technology

Tuesday, March 24, 2009

By Sachi Izumi

TOKYO (Reuters) - The chief executive of Dell Inc said on Tuesday that talk of IBM possibly buying Sun Microsystems was providing an "enormous opportunity" to the world's No. 2 PC maker in the corporate server market.

Michael Dell said such talk created uncertainty over the future of Sun's Solaris-based servers and accelerated a customer migration to the servers based on standard industry components, known as x86 servers, which are Dell's mainstay product.

Apart from the potential IBM-Sun union, Dell is also facing an uphill battle with network equipment maker Cisco Systems with and Hewlett-Packard. Cisco has announced a foray into the server market and HP has started to offer a more complete package of technology services to its corporate clients after its purchase of EDS.

"Just the rumor of IBM potentially purchasing Sun creates an enormous opportunity because all of the Sun accounts are very concerned what will happen to the Solaris platform and Sparc microprocessor," Dell told a briefing in Tokyo.

"I think this accelerates the migration (to x86-based servers) and sends a lot of those accounts into an opportunity," he said.

Sources with knowledge of the matter have said International Business Machines Corp is in talks to buy Sun Microsystems.

The Wall Street Journal reported that IBM was offering to pay at least $6.5 billion in cash, with the total deal value at about $8 billion, including $1.4 billion of cash on Sun's balance sheet.

Dell lags both IBM and HP in the server market, with a 2008 market share of around 12 percent, according to research group IDC. Its focus has been on low- to mid-range x86 servers, and Dell ranks second in that market after HP.

Dell also said that the company was exploring the business of smaller screen devices, while its consumer business is growing faster than the industry in the first quarter.

The company is considering making and selling smartphones based on Google's Android operating system and Microsoft's Windows Mobile software, the Wall Street Journal reported in January.

PC sales make up around 60 percent of Dell's revenue, and the global recession and popularity of cheaper personal computers caused the company's quarterly revenue to fall more than expected in the three months to the end of January.

(Reporting by Sachi Izumi; Editing by Hugh Lawson)