The acquisition of Storagetek should boost Sun's revenues

The move is intended to boost Sun's presence in the rapidly-expanding global data storage market.

Sun's takeover of Storagetek is the company's biggest acquisition to date.

The firm has been battling fierce competition from rival server providers IBM and Dell, and reported a net loss of $9m for the three months to March.

However, that marked an improvement on the same period of the previous year, when Sun's losses hit $760m.

Critical expertise

Storagetek's business focuses on providing companies with secondary storage services, such as data archiving and back-up systems.

In contrast, Sun produces primary data storage equipment systems for databases.

"This is a very important acquisition that will fill a key hole in Sun's strategy. It gives them some critical expertise in the storage services business," said Brent Bracelin, of Pacific Crest Securities.

The Storagetek deal is expected to add about $2bn to the company's annual revenues of $11bn.

But Prudential Equity Group analyst Steve Fortuna questioned Sun's decision to dig deep into its pockets, arguing that job cuts were needed to restore the California-based company's fortunes.

"We do question the rationale of a transaction which reduces Sun's cash hoard by 40% and does nothing to reignite growth or profitability," he said in a note to investors. "We would rather have seen the company buy back a billion shares and fire 10,000 people."