Sun Buys Software Firm Highground

Sun Microsystems Inc. this week agreed to buy storage software company Highground Systems Inc. Monday for about US$400 million in stock in what analysts are calling a growing trend by storage providers to gain credibility as storage network managers.

The deal has raised a number of eyebrows around the storage industry, particularly because of Marlboro, Mass.-based Highground's relationship with Microsoft Corp., Compaq Computer Corp. and EMC Corp.

John Webster, a storage analyst at Illuminata Inc. in Nashua, N.H., said Sun's purchase is a way to buy into an established player in storage resource management.

"Sun often gets hit for its inability to go outside their own backyard into storage management," Webster said. "It's been an issue for them for a long time."

A bigger question on analysts' minds yesterday, however, is not why Sun purchased Highground, but why Compaq and Microsoft Corp. didn't. Compaq is a significant investor in Highground Systems, which also writes storage management code for the Windows 2000 operating system. Its tools for managing removable storage media ships with Windows 2000.

What will happen between Microsoft and Highground "is what I think is most interesting," Webster said.

Highground is also one of dozens of partners in EMC's Infostructure Developers Program, a collection of suppliers that are part of the storage vendor's campaign to support the e-commerce technology infrastructure.

Sun said the deal should help bolster sales of Sun's storage computers, such as the Sun StorEdge T3.

John McArthur, an analyst at IDC in Framingham, Mass., said that in the "broadest sense," Sun's latest acquisition is a challenge to EMC, the industry leader.

"What users want is a lot of the functionality Highground offers -- the ability to discover what storage system is out there, what access rights they have and what kind of data there is, and what system it's on," McArthur said. "Those are all critical issues anytime you're considering a consolidated storage environment. From that perspective, you might view it as challenging EMC."

The Sun-Netscape iPlanet alliance said this week it has acquired knowledge management software maker GrapeVine Technologies.

"There is still a number of storage software companies that are left as potential acquisitions," said Webster. "I think during 2001, a lot of acquisitions are going to be made. It's going to be increasingly clear that hardware is hardware, but the way you differentiate yourself is through software."