SunGard to fight for Comdisco deal

SunGard Data Systems is defending its proposed purchase of troubled rival Comdisco's Availability Services business in the face...

SunGard Data Systems is defending its proposed purchase of troubled rival Comdisco's Availability Services business in the face of a US Department of Justice suit challenging the acquisition on antitrust grounds.

In a statement, SunGard chairman and chief executive officer, James Mann, dismissed the DoJ complaint as baseless. "We believe that the government case is without merit, and we looking forward to proving that in court," he said.

SunGuard recently said it would buy Comdisco's business-continuity and disaster recovery services operation for $825m (£579m).

The purchase was approved by Comdisco and supported by a committee of the company's creditors at an auction on 11 October as part of court-ordered bankruptcy proceedings against Comdisco.

Comdisco, a provider of business-continuity and disaster recovery services, filed for bankruptcy protection earlier this year in the wake of mounting losses.

In a sealed complaint, the DoJ yesterday sought to block SunGard's acquisition of Comdisco on antitrust grounds.

With annual revenue of $1bn (£700m) and more than 20,000 clients, SunGard is one of the largest business-continuity and disaster recovery companies. Together with IBM and Comdisco, SunGard accounts for more than 80% of the market for disaster recovery services.

SunGard's proposed acquisition of Comdisco would place the company firmly in second place behind market leader IBM, said Tony Adams, an analyst at Gartner. But it is unlikely that SunGard would be able to use its enhanced market position to unfair advantage, Adams added. Despite the dominance of the major vendors, the disaster recovery market still has fairly robust competition and several options for customers, he said.

"This transaction is pro-competitive, since it will assure that there is a strong independent business continuity vendor to compete against the hardware giants, with enhanced services and reduced costs," Mann said.

In talks with the DoJ, SunGard agreed to hold off on closing the deal until 15 November, a SunGard spokeswoman said. The DoJ in return has indicated that it is willing to proceed quickly with the case and will push to get a ruling on the matter by that date, she added.

The DoJ dispute is the latest wrinkle in an ongoing tussle involving Comdisco.

Hewlett-Packard, another vendor with aspirations in this market, had earlier said it would buy Comdisco. On 16 July, the companies jointly announced that HP had agreed to acquire Comdisco's technology unit for $610m (£427m) in cash. Under a court-approved plan, an auction was held 11 October to see if there were any bids that improved on HP's. It was at that auction that SunGard trumped HP's deal with its own $825m (£578m) offer, which was accepted by Comdisco.

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