Avnet and Sun: Searching for direction? 17 August, 2009 By Steve Wexler

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During a recent earnings conference call, Avnet COO Rick Hamada said he believes the acquisition will likely have a positive effect on the value-add distributor. Sun makes up about 8 percent of Avnet's enterprise revenues and is its second largest vendor partner.

"It's too early for us to make any prognostications or offer any opinions on what their plans are or how it will affect their customers," said Hamada . "But it seems like it will add a bit of confidence because of the commitment Oracle has said it has to Sun's product lines. Oracles commitment has to have a calming effect on the customers overall."

Jeff Bawol, president of Avnet Technology Solutions, Americas, was also positive. "I think for the industry and partners as a whole, it's good for the speculation to be over." Bawol made it clear that he doesn't know what Oracle intends to do with all the Sun pieces, but he has talked to a variety of both Oracle and Sun partners and there have been no real issues raised. There are questions about what Oracle is going to do, but he doesn't think it will sell of Sun's hardware business.

According to IDC's most recent analysis of the server market, revenues and shipments declined 25 and 26.5 percent year-over-year, respectively. Volume (x86) systems slumped 30.5 percent while non-volume systems only fell 19.4 percent, with Sun's revenue dropping 25.5 percent. Looking ahead, IDC is more mixed, predicting an almost 30 percent nosedive for the second quarter of 2009, improving slightly for the rest of the year. "Although we are now forecasting a 22.1% year-over-year decline in server spending for 2009, the worst of the market contraction is behind us," said Matt Eastwood, group vice president of Enterprise Platforms at IDC. "In fact, by the end of the third quarter this year, nearly 90% of the cumulative market contraction will have been realized as the market begins exhibiting significant signs of stabilization."

Some may be confident about Sun's future, but that's not stopping IBM from poaching. Big Blue says it has 'engaged' with more than 200 of Sun's top channel partners and ISVs over the last couple of months. According to IBM's Mark Hanny, VP, ISV & developer relations, his company reached out to more than 100 top resellers, over 90 percent of which have expressed serious interest in working more closely with IBM. Of the 100 Sun ISVs it talked to, more than 70 percent are interested in developing a closer relationship with IBM and half of those are already actively engaged in deeper technical enablement or go to market activities with the company.

Hanny said the Unix market is primarily driven by three companies -- IBM, HP and Sun -- and by hardware, not applications. He said IBM has picked up double-digit market share from Sun in the last year, and "even more from channel partners. They'd seen such deep cuts and less resources from Sun&it's the reason Sun was on the market."

Other concerns driving this channel alignment include concerns about Sun's future direction under Oracle, the Sparc architecture falling behind other CPU vendors, and Oracle's track record when it comes to maintenance contracts, he added. VARs are very concerned, and they're hearing it from their customers, said Hanny. Oracle tends to "increase their support and maintenance costs 4-5x -- sometimes as much as 7x what they were charging" -- to pay for their acquisitions.

In a statement about the event, Mike Hurst, VP and GM, Avnet Technology Solutions, Americas, Sun Solutions, said "it was time to chart a new course by creating Avnet Compass." The distributor is taking a more strategic approach, and tried to keep attendance to C-level executives within its Sun partner channel. The agenda "includes collaboration and networking sessions designed to accelerate profitable growth."