Sun to buy SeeBeyond for $387 mn

Duncan Martell

SAN FRANCISCO: Network computer maker Sun Microsystems Inc. on Tuesday said it agreed to buy SeeBeyond Technology Corp., which makes software that stitches together disparate computer systems, for $387 million in cash.

The combination will allow Sun to offer customers products that tie together disparate applications such as accounting, payroll and customer management.

Sun is trying to expand beyond sales of commoditized, workhorse machines than run big corporate computer systems and said that the acquisition would give it a strong position in the $5 billion business integration market.

It's the latest move by Sun to boost the number of applications written to run on its technology, which it hopes will boost sales of its server computers and services. Already, Sun has published the source code -- or underlying blueprint -- of its Solaris operating system.

"They see many many large customers that want to do application development and consolidation and they believe they have many of the tools to help their customers do that," said IDC analyst Crawford delPrete.

Sun, which was a Wall Street darling in the heady Internet boom of the late nineties, has since seen the collapse of its stock price and its revenue and profits fall. McNealy is now looking to reposition the company to move into faster-growing markets such as storage and Web services.

"We now jump right to the front of the business integration market," said Sun Chairman and Chief Executive Scott McNealy on a conference call, ahead of his keynote presentation at the company's JavaOne conference here.

Sun agreed to pay $4.25 a share, a nearly 30 percent premium to SeeBeyond's closing stock price of $3.28 on Nasdaq on Monday.

The deal follows Sun's recently announced plans to acquire storage equipment maker Storage Technology Corp. for $4.1 billion. That deal boosts Sun presence in the fast-growing market for data storage. New regulations require companies store more accounting and health care information.

Sun and SeeBeyond had signed an agreement in October 2004 to market their products jointly. Sun will incorporate SeeBeyond's Integrated Composite Application Network software suite with its Java Enterprise System, an integrated collection of software that helps businesses run.

Sun President and Chief Operating Officer Jonathan Schwartz told investors on a conference call that customers' wanted more simplified and bundled technology, rather than having to piece together systems themselves.

Schwartz also said that the deal would appeal to computer services companies, also known as systems integrators, with whom it works, such as Accenture, Computer Sciences Corp. and others.

"Those companies want to do business with companies that don't compete against them," Schwartz said. Sun rival International Business Machines Corp. is the world's biggest computer services organization.

Sun said it expects to complete the transaction in the next four-to-five months.