BOULDER, Colo. –

This week, IBM Corp. may officially shine the light on what would be its largest acquisition.

The technology services giant is finalizing a $7 billion buyout of Sun Microsystems Inc., according to reports from The Wall Street Journal and The New York Times, citing anonymous sources close to the talks.

IBM — which announced plans for a Boulder site in 1965 — and Sun — which set up camp in Broomfield in the late 1990s — are among the two counties’ largest employers. Combined, they employ about 5,000 people.

But the two companies’ regional impact is much broader than their labor pool. They have a combined economic impact of about $1 billion annually to Colorado, said Tom Clark, executive director of the Metro Denver Economic Development Corp., noting a quick, “back of the napkin” calculation.

Boulder gets Big Blue, Sun rises in Broomfield

In 1957, Big Blue got Boulder buzzing when it purchased a 640-acre tract of land east of the Boulder Reservoir and near Highway 119 for $187,505.

“The Boulder area site was selected because this community ranks high in its ability to provide desirable living and working conditions,” IBM officials said at the time.

For the next few years, it was unclear what would be built on the site.

In 1965, IBM revealed a plan to build a plant for computer production on the site.

During the next couple of decades, IBM grew and its technology changed. When the plant opened in 1967, data storage tape drives were the focus. That soon expanded to computer disk drives, copiers and printers.

IBM later would sell some divisions including its low-end printer and printer supplies business to Lexmark and its enterprise-focused Printing Services Division to Ricoh Co. Both Lexmark and Ricoh maintain operations on IBM’s Boulder campus.

Currently, IBM-Boulder is a major hub for the company’s Global Business Services division.

“IBM was the mothership of the tech revolution in Colorado,” said Clark, who formerly headed the Boulder Chamber. “It beget StorageTek, which beget Exabyte and McData and many others.”

More than 80 companies derived from IBM, according to a research project completed a few years ago by University of Colorado graduate students.

StorageTek had high hopes

One of the most notable was Storage Technology Corp., or StorageTek, a tape data storage company founded in 1969 by four former IBM employees. StorageTek hit the ground running, bulking up its work force to more than 8,000 employees in the first 15 years.

It also fell hard shortly thereafter, filing for Chapter 11 bankruptcy protectionand initiating massive layoffs. The company rebounded and took a few more hits during the coming decades, and eventually landed in the hands of Sun in 2005.

Nine years before it bought StorageTek, Sun — Silicon Valley’s new kid on the block — announced plans to build a campus in Broomfield. Original plans called for a site greater than 1.5 million square feet and a potential 4,500-person work force.

“Sun’s arrival was in part based on the critical mass of tech workers (in the area) that started with IBM,” Clark said.

The potential of Sun’s positive rays spread as well. Twelve months after the company announced it would build a campus in Broomfield, at least eight major commercial and residential projects were announced for the budding Interlocken office park and the surrounding area.

“There’s no question that there’s a multiplier effect with any business with real jobs,” said Byron Koste, executive director of the University of Colorado’s real estate center. “(Sun) was a boon to the area; it was an economic boon to the owners of Interlocken.”

Sun’s selection for a Broomfield site was a precursor for a 1998 decision by telecom Level 3 Communications Inc., then a telecom subsidiary of a Nebraska-based construction contractor, to establish its headquarters in Broomfield. Level 3 expected to employ 3,000 to 5,000 people at the site, and eventually met its expectations.

John Scarano, co-founder of the Louisville-based Zayo Group and an original Level 3 employee, said the presence of IBM and Sun helped create a “critical mass” of tech workers. That makes the area ideal for companies like Zayo and others ranging from startups to established firms, he said.

“We hire more and more people here, typically higher-tech positions,” he said. “And I see us as a good example of things to come because of the generation of tech-oriented employment that has existed here.”

The combination of the two

One thing that is constant is change, and both IBM and Sun have experienced their fair share in recent years.

IBM has slashed thousands of jobs nationwide. This year alone, a union group representing IBM employees said the tech giant has cut 10,000 jobs and outsourced that work to lower-cost sites in places such as India.

The ongoing layoffs appear to have affected the Boulder site. IBM said in 2008 it had 3,400 employees on the Boulder site. This year, the company says there are about 2,800 local employees.

The tech bubble burst hurt the once powerful Sun, and its profits have since struggled. Sun acquired Louisville’s StorageTek for $4.1 billion in 2005 as a potential financial boost to offset some tumbling sales, then-CEO Scott McNealy told the Camera at the time.

Following the purchase, Sun eventually transferred the StorageTek employees to the Broomfield campus and later sold its Louisville property to ConocoPhillips, which plans to build a research facility and a global technology center on the 432-acre site.

In efforts to return to profitability, Sun cut thousands of jobs across the company during the past couple of years, bringing its local work force down from 4,000-plus to about 2,150 employees.

If IBM does acquire Sun, more layoffs will ensue, analysts and local industry observers say.

Noting similarities in the two companies’ servers, storage and software businesses, Forrester Research analyst James Staten told Forbes.com that IBM could lay off one-third of Sun’s staff — more than 10,000 employees — or possibly 10,000 employees across both companies.

CU’s Koste said he would expect a “redeployment” of some kind at the companies’ local campuses. Both sites have available space, but Sun’s space also is newer, he said.

“The new owner will take a look at whatever surplus assets that they have. Do they sell into this market, which in the near-term is a depressed market? Or do they hold it for an improved market?” he said. “Depending on what they decide, it will have an impact on the surrounding area.”

Sun has a substantial economic impact to the Broomfield area, and the hope is whatever change comes will be positive, said Charles Ozaki, deputy city and county manager for Broomfield.

He added that Interlocken and the surrounding business parks have diversified over the years, noting companies such as engineering firm MWH, natural foods company White Wave Foods, and packaging and aerospace company Ball Corp. are headquartered there.

While layoffs could hit home, both companies’ local campuses do have some “mission-critical” services on site and some diversity, which could work in the region’s favor, Metro Denver’s Clark said.

“(The merger) grants both companies the ability to expand on one another’s campuses, and it pretty much locks down metro Denver as the place where the new IBM will continue to grow,” he said.

Contact Camera Business Writer Alicia Wallace at 303-473-1332 or wallacea@dailycamera.com.

Archived comments

Department of Redundancy Department.

annoying@annoying.com

4/4/2009 2:45:15 PM

I read these articles all the time and almost never see any commentary from customers. Where’s their perspective?

Some might think that IBM will do a better job servicing them while others may lament the abrupt end of service on equipment. Let’s hear about that please Daily Camera…

RoundisaShape

4/4/2009 2:57:17 PM

Its going to be interesting to see how Sun changes.

Traditionally Microsoft has been Seattle, Proprietary Sware/Lawyers, mass market and profit.Sun is Silicon Valley, Open Source/geeks, high end performance and technology.

This could have a huge change on technology innovation in the US depending on how IBM plays its cards.

trappist99@yahoo.com

4/4/2009 3:40:39 PM

When you’re green you’re growing, when you’re ripe you rot, lets see if these two ripe companies can innovate again, and do it here in the USA, and hopefully Boulder county…………

Good luck to all………..

thecondoguy1

4/4/2009 4:17:34 PM

IBM was already too big. I don’t know that it’s done anything innovative in decades.

1860

4/4/2009 5:10:33 PM

This won’t happen in the US.IBM is officially moving jobs overseas, most to India.They are flying under the radar, making the largest profits in history, advising Obama to create jobs in the US and then doing then firing US employees for foreign ones.The issue here is not protectionist, but that a lot of these jobs that are going overseas are college grads.IBM even offers to fire employees if they agree to move to another country for a lower wage.

Apparently all the talk we have heard about the short sighted economy and how that helped to devalue the financial system is just that.Talk.IBM is just continuing on, even with record profits and moving much of their business overseas.

The big picture is brain drain, less jobs, slower growth in America and the continuation of the selling off of the United States.

America is on sale!Come and get it!

super_boulder

4/4/2009 5:14:12 PM

Typically takeover is also about customer domination.Either customers will enjoy having IBM products (renamed from being Sun/StorageTek, of course) or decide to go elsewhere.This can drive customers to seek alternative solutions either cheaper or better customer service.

susie_q

4/4/2009 8:13:11 PM

IBM is gargantuan, unwieldy and beholden to Wall Street. They’ll just keep acquiring and shedding overhead, forcing the remaining workers to carry the load. There’s no diversity in the market. You have a few super-huge companies each basically carving up the United State and world not unlike the robber barons. It’s a monopoly with a big blue smiley face.

meatpieandtatters

4/4/2009 8:18:21 PM

IBM will officially take over as Java’s custodian, a mere formality since IBM made the greatest contributions to Java anyway. As for SPARC and Solaris, and some of the other projects Sun has worked on, I think the future is uncertain. Since about 2000 IBM has focused on being an IT service provider not a technology innovator. I don’t expect we’ll see the culture of IBM change as a result of this acquisition.

I acknowledge super_boulder’s comments, but what I’ve heard IBM really wants is people with Ph.D’s in science and engineering. They’ve been seeing a dwindling supply of Americans who are interested in these fields. For the past 7 years most science and engineering Ph.D’s awarded at American universities have been going to foreign students. IBM will go not only where the lowest cost is, but also where the talent and skill is in abundance. The talent they’re looking for here is too rare and too expensive for their taste. From what I hear there is concern at IBM about this, but I get a sense that they feel powerless to change the situation. Many technology leaders in the U.S. have been sounding the alarm about this for the past several years. They wish for something like a “Sputnik moment” that will inspire our government to invest in high quality math and science education for students, as they did in the 1960s, and inspire Americans to study science and engineering again in large numbers. Unfortunately such a moment is not forthcoming. As a rule Americans hate math and don’t particularly like science, and our math and science education in the public schools sucks by and large (which sinks the popularity ratings of these two subjects), so this isn’t going to happen spontaneously.

Something that would help is if we insisted on teaching the essence of mathematics and science in our public schools in a way that youngsters and teenagers can understand, rather than as adults understand these subjects. Representation and approach are critical to understanding. What our educational system doesn’t understand is that you can teach math and science all you want. If you don’t convey a subject in a way that promotes the understanding of the critical ideas in it, then you’re wasting everyone’s time and money.

mmille10@comcast.net

4/4/2009 8:50:17 PM

Acquisitions generally result in reductions in the workforce to increase efficiency, eliminate redundancy, and cut areas not essential to the overall business strategy. Unless the local IBM and Sun sites miraculously avoid these land mines due to some unique synergy, expect more layoffs. I hope I’m wrong.

bnorthrop

4/4/2009 9:22:26 PM

mmille – You are right, they want talent.I certainly can understand wanting to go where the talent is abundant and cheap as a business owner.It is disappointing that we have gotten to this point in our country where we literally have sold ourselves out and that it feels that to compete we must continue even though we know in the long run we are only hurting ourselves.

We even sold the next working generation out.

Luckily business is easy to start in the US, where as India still requires lots of bribes in most areas.There are many people that will lose their jobs here who have PhD’s because now, they are becoming more abundant in India and it costs less to live, or at least they are willing to ask for less.

The catch 22.How do we compete and tell our kids to get degrees that take so long and are so expensive to get when the guy in India has the same degree and will work for less?I suppose the reality is difficult to accept that globalization means the equalization of pay for jobs like this that are so lucrative.If you can telecommute to Louisville, why not Bangalore?

It should be interesting to see.

super_boulder

4/5/2009 12:17:27 AM

“IBM was already too big. I don’t know that it’s done anything innovative in decades.” And, “…not a technology innovator.”

Unless you consider that IBM leads the world in patents of new inventions, year in and year out.And, if true, why would they seek Ph.D.’s in science and technology?

Just because they haven’t created a new bauble for you to flaunt doesn’t mean they aren’t innovative.

Americans, in general, are more interested in buying cheap material goods at WalMart (thus making it the largest retailer in the world), than saving to put their kids through college.

We reap what we sow.

backrange

4/5/2009 9:00:23 AM

College is just a major business selling education they won’t tell kids or parents that most graduates never get a job in the field they bought a degree in, they feed them full of dreams of 6 figure salaries ect.

The basic fact is they sell a lot more degrees then there are jobs for.

They are still selling computer-programming degrees when coders in India will type code for 2 dollars a 10-hour day.

Companies have to show profits so they cut labor.

sidd

4/5/2009 9:13:10 AM

I think the big reason companies like IBM are seeing a dwindling supply of graduates in science and engineering from colleges is because students are figuring out, because of cost cutting moves like what IBM is doing, they are dead end degrees. Yes, I was an engineer at one of the companies named in the article, and it became more and more apparent, the industry as a whole treated their tech staff as a replaceable commodity, they could get comparable work from somewhere else, for a cheaper salary. A lot of the reason we are in the financial mess we are in now is because in the last decade, the bright people who might have gone into science and engineering, have gone into investment banking, where they could reap in far more.

nuggethillrd@skyxpress.net

4/5/2009 10:51:33 AM

It really is an unsuitable system they need profit so they cut labor cost then after a decade or 2 all the possible outsourcing labor is in India, then to cut cost further they send the labor to Asia.

Then there is just no more else to cut labor cost the system is played out. No more room to show profit from labor.

Then shareholders sell and it collapses.

sidd

4/5/2009 12:21:55 PM

The fact remains that I/T work requires a serious amount of thought. As computers and networking gets faster and more reliable, we will see smart people all over the world getting similar jobs. I think it is a good thing that hard-working smart folks in Asia have the opportunity to improve their lot in life by working office jobs instead of breaking their backs in rice paddies or sewing Nike’s. Just like Europe “lost” jobs to the USA in the 1900’s, we are “losing” jobs to Asia now.The standard of living in Europe didn’t drop nearly as much as it rose in the States. We will see similar effects with globalization in this century. It is a form of racism and intolerant nationalism to deny better living conditions to other people just because they live 6,000 miles away.

biteme@bugmenot.com

4/5/2009 1:09:59 PM

mmille10

“If you don’t convey a subject in a way that promotes the understanding of the critical ideas in it…..”.

Sorry its not one subject, all subjects should be tought to a uniformly high level so students will become used to extending themselves.

A number of subjects have become “soft” or “easy” requiring opinions rather than rigorous analysis and study.You cant blame kids for taking their best subjects and avoiding the tough stuff.

trappist99@yahoo.com

4/5/2009 1:22:22 PM

Marketwatch is reporting that the deal is falling through.

http://www.marketwatch.com/news/story/ibm-sun-7-bln-acquisition/story.aspx?guid={BA214DEA-5D5E-4C13-9C07-79105E5C5825}&siteid=bnbh

chartguy

4/5/2009 4:49:51 PM

Fell through,I heard.

xxx

4/5/2009 5:13:28 PM

deal dead:

http://tinyurl.com/cyudur

n_bot

4/5/2009 5:16:40 PM

I’m all for them staying separate.That link doesn’t work, but its on their front page.I sure hope the SUN crew sold their stock last Friday.

super_boulder

4/5/2009 9:41:08 PM