Sun Microsystems announced that it will acquire all of the outstanding shares of capital stock of information appliance technology vendor Diba Inc. Upon completion of the acquisition, Diba will become a new business unit within Sun S Microelectronics division, called the Consumer Technologies Group (CTG). Both Farid Dibachi, Diba's chairman, and Farzad Dibachi, its president and CEO, will report directly to division president Chet Silvestri. The new group will work with consumer electronics companies and manufacturers to provide technologies for building consumer products, such as Internet-enabled TVs, set-top and satellite boxes, and smart phones.' In addition to growing the consumer appliance market, Sun S acquisition of Diba will provide it with a good opportunity to push its Java chips. For Diba, the acquisition is a relief
• Sun's acquisition of Diba will attract much-needed attention to Internet appliances. Consistent with Diba's grand vision that consumer electronics manuufacturers, rather than PC companies, will bring the Internet to the masses, Sun is pursuing licensing agreeements with a number of consumer electronics vendors. Jupiter Communications, however, believes that this space will fail to achieve mass-market appeal by the millennium due to the continued penetration of PCs. By 2000, nearly six million North American houseeholds will have a non-PC access device. Despite slow growth, Sun's investments-in addition to those of IBM, Microsoft, Oracle, and a number of other compaanies-will be crucial for consumer acceptance.
• In addition to pmmoting its own flavor of Java, Sun's acquisition ofDiba will help it push its Java chips. Less than a year ago, Sun Microelectronics released its Java chips and associated Picojava architecture. While dedicated Java chips do compile Java bytecode faster (12 times faster by some accounts), they have proven to be poor performers with other languages. An unlikely candidate for the PC market, Java chips have been patiently waiting for their big day in the sun. By acquiring Diba and investing in the growth of Java-centric Internet Appliances, Sun is understandably betting that its Java chips will appeal to appliance vendors.
• The SunlDiba partnership makes it the most recent entrant into an elite circle of Internet appliance players competing against Microsoft. In April, Microsoft purchased WebTV for $425 million. Microsoft intends to position the WebTV technology, in addition to its WmCE product line, to corrner the Internet appliance space. On August 5, Sun signed an agreement with the Open Group alongside Oracle, NCI, IBM, and Digital Semiconductor to promote the Network Computer Reference Profile (NCRP). The goal of the initiative is to ensure software and hardware compatibility within this fledggling market. By acquiring Diba and leveraging its pre-existing partnerships, Sun is ensuring itself a horse in the information appliance race.
• For Diba, Sun couldn't have agreed to shine at a better time. Trailing in the wake of highly hyped WebTV and Navio, Dibahas only been successful in solidifying a small number of business partnerships. Samsung Electronics Co. is using the Diba technology in television sets sold in South Korea, and LodgeNet Entertainment Corp. is using Diba for Web access in hotel rooms; however, Zenith Electronics decided to drop Diba in favor of Oracle's techhnology. Understandably, Diba's inability to bring its technology to market expeditiously-along with Microsoft's moves-set the stage for acquisition negotiations. Sun will give Diba the means to keep developing its technoloogy until Internet appliances become more accepted in the home.
• Sun does not want to cede yet another market to Microsoft. Since SunSoft came out with its Java programming language over a year ago, it has been engaged in an endless tug-of-war for the platform-independent title. Leveraging its control over the operating system developer market, Microsoft's first move was to wrap Java into its Application Programmers Interface (API) with the release of its J++. Microsoft then released its own platform-independent strategy in the form of its ActiveX technologies. Finally, to add insult to injury, Microsoft developed its own Java virtual machine (VM) that compiles Java code more efficiently than Sun's own VM. Sun's acquisition of Diba is a logical move for a company that has both the back-end technology, hardware, and capital to comer this fledgling market.
