Sun Microsystems To Acquire Parallels For $ 205 Million (Updated)

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Looks like that Parallels IPO won’t be happening after all. Sun Microsystems has today announced it has reached an agreement to acquire Parallels (formerly SWsoft) and all of its assets for a whopping $ 205 million. The major acquisition had been rumoured to be imminent throughout the course of 2007, but never actually went through, which led mosts analysts to believe the Herndon, VA-based company was heading towards an IPO following in VMware’s footsteps rather than being picked up by one of the big boys.

Needless to say, the acquisition is a pretty bold one, which is bound to serve as wake-up call for the entire virtualization industry. Both companies had been on a buying spree the past few months: Sun picked up innotek / VirtualBox, while Parallels recently acknowledged its January acquisition of ModernGigabyte. The acquisition is expected to be finalized by June, around the time Sun also plans to ship xVM Server.

“With the acquisition of Parallels, Sun’s ready to become the only true leader in virtualization technology,” said Brian Sutphin, Executive Vice President Corporate Development & Alliances for Sun Microsystems. “With Parallels’ strong desktop position, we will be able to cater both Windows/Linux and Mac users with our state-of-the-art virtualization offering.”

Sergei Beloussov, Board Chairman and CEO of Parallels, added:”We’re extremely excited about the opportunities this merger will bring for our many customers and partners. We’re looking forward to effectively integrating our server product line with Sun’s sparc systems.”

Parallels, former SWsoft, has been making waves ever since it was founded in 1999. The virtualization technology company today counts more than 900 employees worldwide and has more than doubled revenues every year for the past eight years, while its products have been giving VMware a run for its money, especially in the small- and medium-business marketplace. The company was backed in 2005 by Intel Capital, Bessemer Venture Partners, and Insight Venture Partners.

While VMware has been more than struggling to consolidate its splashing entry on the public market, Parallels has effectively become the second largest virtualization seller, with both containers and hypervisor plays in its portfolio. Sun’s bold move is logical in this regard, be it quite late, as this acquisition would have made more sense if it had happened around this time last year.

We’re still scrambling to get some official comments on the news from market insiders, we’ll update this post as they come in!

Update: obviously, this was an April Fool (we’re in based in Europe, so it’s April 1 earlier than over in the US).

On any other day, what would you think about this announcement? Would it have surprised you that much? Do you think it would be a fair valuation and a good synergy? Let us know in comments!

(also: check some classic April Fools’ Day jokes here)

Update 2: kudos to Parallels for their sense of humour, thanks to Brian, Dan and Tarry for linking and to the person who dugg the story ;)

Update 3: check out our follow-up post

About the author

I'm a blogger, entrepreneur, conference organizer, social media consultant, startup advisor and allround web addict, based in Belgium, Europe. I'm a writer at TechCrunch and managing editor of Virtualization.com.

23 Comments

  1. John says:

    Nice one! I almost bought it at first, but then looked at the calendar to see that it was April 1st :)

    Reply
  2. Jeff says:

    Wow, Sun must be really desperate. Why would they buy second rate POS like Parallels?

    Perhaps Sun wants some help in the marketing department, and they’re buying Parallels to help them acquire a core competency in lying to customers, and over promising and under delivering on products? That’s what Parallels has been good at for a while.

    Reply
  3. Richard says:

    Apple acquires Sun!!!

    Reply
  4. M Sharma says:

    This sounds like an April fools day post to me – had me fooled for a minute since it is still March 31 in the US. Hats off for being the one to break this news if indeed it is true.

    Reply
  5. Skeptical says:

    Source?

    Reply
  6. Jack says:

    Hmmm. No mention of this on Sun’s press release page at http://www.sun.com/aboutsun/media/pressroom.jsp .
    April fool’s??

    Reply
  7. Cameron says:

    Had me there, although rumours were someone offered them $750m already and turned it down.

    Reply
  8. Dj says:

    Hey guys this is an APRIL FOOOOOL :) but was good :) haha

    Reply
  9. Frederick says:

    Would be a bargain – someone should do it!!! There revenue is supposedly $100m+ given XEN’s valuation of 50x that would be $5bn market CAP :)

    Reply
  10. David says:

    I figured this was an April fool when I saw the dollar amount of the acquisition and when Parallels was spelled incorrectly in the quoted press release. :)

    Reply
  11. Thanks David, fixed ;)

    As to the amount, not quite easy to place a valuation on a non-public company, what would you have considered a fair price?

    Reply
  12. JRingo says:

    What a waste of money. This reminds me of Citrix purchasing Xen.

    Reply
  13. Those Sun guys are not so daft to fall for that.
    They already acquired a real gem in VirtualBox

    -FB

    Reply
  14. Jon says:

    I thought April Fools jokes were supposed to be funny, no? this just reads like a straight news story, and is plausible. It even got picked up in my Google Alerts e-mail I get on Sun every day.

    Reply
  15. Joe says:

    How is this funny? Is Parallels in on this not-funny joke?

    Reply
  16. Ah Jon, that tells me it’s actually a good one. Jokes are supposed to be funny, April Fools are supposed to, you know, fool you. If you thought it was misleading, that means it worked, right?

    @Joe: yeah, we’ve been in and out of meetings with the Parallels and Sun management team for the past 5 months to discuss our strategy for today, and ultimately mocked up this post in conjunction with their respective PR agencies and inhouse communication executives.

    No, for the record: we’ve thought this up ourselves completely, and we can imagine the people at Sun and Parallels had good laughs at the story themselves this morning. They were in no way involved, so the whole post is entirely fake.

    Reply
  17. I could see that happening, but not at that price. Parallels is worth more.

    Reply

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