Will Sun Microsystems' decision to part with nearly half of its cash reserves to acquire StorageTek make it "one of the largest enterprise storage players on the planet," as chairman and CEO Scott McNealy put it? Probably a stretch. Is it a sign that Sun is desperate and had nowhere to turn other than to a slow-growing supplier of tape-archival systems, buying itself time before it ultimately implodes? Remains to be seen. But if Sun executes properly, there's upside potential for both companies and their respective partners.

No shortage of skepticism exists among pundits about Sun's move to buy StorageTek for $4.1 billion ($3 billion if you take into account StorageTek's cash reserves). Indeed, many on Wall Street have valid reasons to pan this deal, most notably due to StorageTek's declining revenue and unlikely prospects that the company will give Sun a meaningful lift to earnings during the next 12 months (though R.W. Baird analyst Dan Renouard sees earnings accretion of 5 to 10 cents per year). Also, while StorageTek's high-end tape-archival libraries are pervasive among major data centers, there's no obvious reason to believe that customers will suddenly be banging on the door for Sun's hardware or software as a result of this deal. "Sun's storage solution is pretty weak," says Eric Geslien, director of business development at South San Francisco-based All Points Networking, a Sun partner that sells its servers and software.

So, why the marriage? "There are upsides and downsides to every potential acquisition, but if the goal is to double the size of your storage business, and that's what the goal was, they did it," says John McArthur, who heads up IDC's storage research practice. Adds Tony Asaro, an analyst with Enterprise Strategy Group, the deal puts Sun more in line with IBM and Hewlett-Packard as a full provider of data-management solutions. "It makes Sun more of a total solution provider," he says.

Creating Balance

Mark Canepa, executive vice president of Sun's storage products group, says filling out the company's data-management infrastructure is the "third leg of the stool," the other two being computation and middleware. "It has been clear for quite some time that data is a huge part of this equation," Canepa concedes.

Already considered a latecomer to storage, Sun officials late last year determined it needed to become more aggressive. That clearly wasn't going to happen organically. Among the options considered: trying to outbid Symantec for Veritas, making a bid for CA and acquiring Hitachi's storage business, IDC's McArthur notes.

"Some of these were virtually undoable," he says. Acquiring StorageTek, however, was a no-brainer, McArthur adds, because StorageTek generates cash and is in the throws of new product releases, and the barriers to entry among competitors are too high to pose competitive risks. "With 1,200 storage specialists, Sun is going to be in a lot better position to sell storage solutions than it was before, and could be much better equipped to support partners," he says.