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 firstname.lastname@example.org.