Applications

Sun To Buy StorageTek in $4.1 Billion Deal

In a deal analysts say should make some stockholders happy, Sun Microsystemsannounced today that it would buy StorageTek for US$37 a share, or $4.1 billion, in cash. Both boards of directors have approved the move.

Sun also agreed to assume StorageTek employees’ stock options. Buying the data storage equipment maker gives Sun a wider range of data services.

Happy Stockholders

StorageTek, founded in 1969 and based in Louisville, Colo., makes tape drives and network management and backup software for businesses and government agencies. Sun offers storage products as well but the company is better known for its Unix-based servers.

“We think it’s a good deal for StorageTek shareholders; we’ve had a ‘Consider Selling’ price of $37-$38 on StorageTek for a while, and we’re pleased to see the board unlock the value for investors,” Morningstar analyst Rod Bare wrote.

“I think StorageTek stakeholders will be very happy,” John Webster, senior analyst and partner, Data Mobility Group, told TechNewsWorld. “I would guess that the large StorageTek customers who have been with StorageTek since the early IBM mainframe days are guardedly optimistic at this point.”

But while the deal may be a good one for StorageTek, the future is still hazy for struggling Sun.

“As for Sun, well, there are always high hopes in the early stages of any acquisition. However, history is quite clear on the usefulness of this activity; more than half of all acquisitions destroy value when all is said and done,” Bare wrote, adding that Morningstar will wait for further strategy details before passing judgment on the deal.

Commitment to Storage

Webster, whose company focuses on the storage industry, was somewhat more optimistic.

“Sun’s history in storage has been to keep up with the rest of the industry by acquiring the technology it needs to remain a viable player rather that develop the IP in house,” he said. “Now Sun has a premier storage R&D organization. There are now 4.1 billion reasons to believe Sun is now truly serious about storage.”

Sun said the deal is expected to be finalized by early fall. The companies will put together an integration team and begin working on how best to merge in the meantime.

StorageTek, which has about 7,100 employees, already had a close relationship with Sun as a value-added reseller. The announcement pushed StorageTek stock up more than 5 percent, to $36.45 a share, at midday. Sun stock was down almost 4 percent, to $3.75 a share.

Leave a Comment

Please sign in to post or reply to a comment. New users create a free account.

Technewsworld Channels