What to make of Sun Microsystems and Stor- ageTek?
Tom Clark, executive vice president of the Metro Denver Economic Development Corp., put it this way: “When was the last time you saw two struggling companies merge and come out with a great new company?”
Hmmm. I don’t know, Tom. Was it Hewlett-Packard and Compaq? Gee, you stumped me there.
A reader responding to a blog on the ComputerWorld website expressed the same sentiments – only a bit more graphically:
“This kind of reminds me of seeing two ugly women kiss each other in a bar. … You know it should be enticing, but once you take a good look at it, you know something just isn’t right!”
Sun has struggled mightily since the tech bubble burst.
Louisville-based StorageTek has vastly improved since chief executive Patrick Martin took the helm in 2000, but despite this turnaround story, Storage Tek’s revenue stream is still about the same as it was 10 years ago.
“I look at it as job retention,” said Clark, who along with other civic leaders was worried that Santa Clara, Calif.-based Sun might have to pack up its 2,700 Colorado employees or that StorageTek might not be able to maintain its 2,000 Colorado workers.
Sun and StorageTek have been working together for years under reseller agreements. And Sun’s Colorado campus is about a three-minute drive from StorageTek’s. It would be a shorter drive if they were not separated by U.S. 36.
“We’re going to take the highway out,” joked Sun CEO Scott McNealy in a conference call with The Denver Post on Thursday. “We’d like to talk to your governor about that.”
If Gov. Bill Owens could reroute U.S. 36, would that mean more or fewer Colorado employees?
“I don’t speculate,” said McNealy. “I got out of that business pre-bubble.”
My guess is that this merger will not result in heavy job cuts because Sun primarily makes computers and software while StorageTek makes data-storage devices.
But not everyone is happy when two CEOs cut a deal that might save jobs.
“We do question the rationale of a transaction which reduces Sun’s cash hoard by 40 percent and does nothing to reignite growth or profitability,” wrote Prudential Equity Group analyst Steve Fortuna in a note to clients, as quoted by Reuters. “We would rather have seen the company buy back a billion shares and fire 10,000 people.”
“I don’t even know how to respond to that,” McNealy said. “No matter what we do, we get yelled at.”
I, for one, would rather see 10,000 Wall Street analysts fired.
Juan Rodriguez, who co-founded StorageTek nearly 36 years ago, said he was surprised and a bit saddened to hear of the deal. He left Storage Tek in 1985, shortly after its bankruptcy filing. He then founded, and is chairman of, Boulder-based Exabyte, another now-recovering storage-device maker.
Rodriguez said he felt estranged from StorageTek after its 1984 bankruptcy filing. He no longer holds a stake in the company, but it was partly his brainchild and he was happy to watch it recover.
Last year, StorageTek invited him back to its campus to celebrate its 35th anniversary – a major milestone for any company in the tumultuous technology sector.
“I am a little sad to see the StorageTek name (get taken over),” Rodriguez said. “But the company has been struggling to increase revenues for a long time, and Sun could really re position them.”
Al Lewis’ column appears Sundays, Tuesdays and Fridays. Contact him at 303-820-1967 or alewis@denverpost.com.
