Sun deal could make IBM unbeatable in Unix server market

If IBM actually were to buy Sun Microsystems Inc., the world's largest maker of Unix servers would take over the No. 2 vendor. Unix servers may not be getting as much attention as Sun's Java and MySQL technologies are in merger speculation land, but it is the Unix market that could put the prospective deal on the radar of regulators.

An acquisition of Sun would give IBM nearly two-thirds of the worldwide Unix server market, according to research firm IDC. IBM sold $6.4 billion worth of Unix servers last year, for a 37.2% market share, while Sun's sales amounted to US$4.8 billion, for a 28.1% share, IDC said. Trailing behind in third place was Hewlett-Packard Co., with $4.6 billion in sales and a 26.5% market share; after HP, the rest of the vendors counted by IDC had single-digit shares at best.

Unix systems, which IDC said accounted for 36% of overall server market revenue in last year's fourth quarter, continue to see their share of data center processing be eroded by Windows and Linux servers. But many businesses and government agencies still rely on Unix machines to run some of their most critical applications and databases.

IBM owns the mainframe market, and the prospect of it gaining a substantial piece of the Unix business - and in particular, the high end of that market - via an acquisition of Sun is worrisome to Ed Black, president and CEO of the Computer & Communications Industry Association in Washington.

High-end Unix servers, such as HP's Itanium-based systems running HP-UX and Sun's top-of-the-line UltraSparc-based hardware with Solaris, are the machines most often cited as mainframe alternatives.

"There is no doubt they've got a monopoly in the mainframe market," Black said of IBM. User choice requires having access to substitute products, he added - but if IBM acquires Sun, it "takes a huge competitor away," said Black, whose trade group represents companies such as Google, Oracle, Red Hat, Advanced Micro Devices and Microsoft.

IBM has faced periodic legal challenges over its mainframe dominance, most recently in January, when a Tampa, Fla.-based mainframe maker named T3 Technologies Inc. filed an antitrust complaint with the European Commission accusing IBM of refusing to sell its z/OS operating system to T3 customers. IBM rejected the claims and accused T3 of trying to violate its intellectual property rights.

But Ken Wasch, president of the Software & Information Industry Association, another Washington-based trade group whose members include IBM, Sun, Oracle and numerous other vendors, said he sees no chance of an antitrust battle arising from an IBM acquisition of Sun.

Antitrust issues typically arise only when a dominant vendor acquires a smaller competitor and then uses its increased market power to restrict new entrants and control prices, Wasch said, adding that he doesn't expect federal regulators to raise any red flags if IBM and Sun do agree to a deal. "I don't see [potential issues] in any area," he said. "I have absolutely no concern that the Justice Department would seek to block this merger."

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