Sun Microsystems has paid stock worth $US160 million to acquire storage hardware maker Pirus Networks, according to an industry analyst, who said the deal could signify the start of renewed investment and innovation in the storage business.
Sun's acquisition, coupled with IBM's recent buy of storage software maker TrelliSoft, is a sign that vendors are once more ready to make significant investments in storage, said Arun Taneja, a senior analyst with Enterprise Storage Group.
A spokesman for Sun would not confirm or deny the value of Sun's Pirus acquisition.
"This is a stepping-out again in the storage industry," Taneja said. "In connection with IBM's deal, I think it shows the industry is moving again."
Like other hardware businesses, the storage sector has been hit hard by the worldwide economic slowdown.
In announcing the Pirus acquisition on Thursday, Scott McNealy, Sun's CEO, chairman and president, said Sun is ready to bolster its product portfolio by making further acquisitions. The company plans to make other buys to build out its network management framework, dubbed N1.
"You're going to see a lot of little and interesting technology acquisitions by this company, in an opportunistic manner," McNealy said. "It's much better to go and buy now than it was two or three years ago. You can actually get something of value for your dollar."
The Sun deal is a sign that vendors are once more looking to advance their technology even in the tough economic climate, Taneja said.
"The pricing of the deal is actually more than I had anticipated," he said. "It tells me that they saw enough value in paying that kind of money. For all practical purposes, Pirus has no revenue, but there is the promise of the technology."
Sun also shed more light on its N1 strategy to help systems administrators manage complex networks of servers, storage systems and networking hardware. Sun hopes to be able to provide its customers with a more abstracted, or virtualised, view of the hardware in their network.
Armed with this view of their systems, and with upcoming management tools from Sun, administrators should have an easier time deploying applications. The Pirus acquisition should help the company round out part of the storage piece of this architecture, Sun said.
Sun plans to use its $US5.9 billion cash surplus in its quest for more acquisitions, McNealy said. The company has shied away from cutting back on research and development costs and continues to make deals that bolster its technology, despite lacklustre hardware sales.
McNealy did say he made some mistakes during Sun's growth period that continue to affect the company's financial position.
"I allowed us to hire too many folks in the field," McNealy said during a news conference. "I am going to be very careful when we add headcount in the field."
In addition, he said he would be reluctant from here on out to expand the company's real estate portfolio. "I am going to be very careful before I sign another lease," he said. "These things last 30 years."