Looking to stem losses and significantly boost its data protection, management and storage wares, Sun last week dug deep and acquired Storage Technology (StorageTek) for $4.1 billion.

Sun blamed its StorEdge storage product line partly for weak financial results reported in April. Sun posted a net loss of $61 million for the quarter ending March 27. Company executives said one problem was that the rate at which customers purchase Sun's storage products, along with servers, had dropped over the last three quarters. Sun competitors, such as IBM, have been selling storage devices with servers, but Sun has lagged in that market.

Though Sun created the Network File System (NFS) protocol used in the network-attached storage market, it is widely recognized that the company has not matched the success of competitors IBM and HP at selling storage products with its server systems.

Meanwhile, StorageTek and Sun had a close relationship before the acquisition. StorageTek had a continuing OEM agreement with Sun, starting in 1999. Sun has been StorageTek's largest OEM partner, offering StorageTek libraries under Sun's StorEdge brand, according to StorageTek.

Sun CEO Scott McNealy says the acquisition might just be the beginning. "Sun's technical and financial strength puts us in a great position to act as a consolidator in the [IT] industry," he says. With StorageTek "we have an end-to-end capability" from the development, creation, capture, management, storage and archiving of data, he says.

Industry reaction

"It certainly fills out Sun's storage offerings - they will now be able to control tape library, as well as drive offerings," says Randy Kerns, senior analyst for the Evaluator Group. StorageTek's tape products accounted for 77% of its revenue in 2004.

This acquisition also will give Sun a sales and support channel the company didn't have, analysts and users say. Through the acquisition, Sun will acquire a more than 1,000-person salesforce.

"Even though it is going to take Sun some time to rationalize all the storage products between the two companies, the most important thing it accomplishes for Sun is providing them with a sales and pre-sales technology force that can actually understand and can sell storage," says Stephanie Balaouras, senior analyst at The Yankee Group.