Sun faces uncertain future 12 November, 2008 By Paul Weinberg

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Industry analyst Denise Sangster has talked to corporate customers about the future of Sun which last month lost posted a $1.7 billion (US) loss in its latest quarter.

"When they invest in Sun, they make multi-multi year commitments to the architecture, to the software, to the services. And it is a huge problem for them, right now. Many of them have been big fans of Sun and of their platforms and of their architecture. But many of them are worried."

The failure of Sun's top management to publicly and immediately address these concerns has not helped matters, added Sangster, president and CEO of Global Touch Inc.

"[Customers] have not heard a well articulated message out of Jonathan Schwartz [Sun CEO] to persuade them that the company is really on the right track."

Officials for Sun did not respond at press time.

Neither the option of selling the Sun to another vendor nor an asset divestment (such as selling StorageTek or MySQL) are especially palatable, commented Charles King, principal analyst at Pund-IT.

He stated that a purchase by either IBM or Hewlett-Packard of Sun's hardware division would not make financial sense. "The probable cost appears much higher to me than the potential gain."

The most obvious white knight is Fujitsu, continued King. "It's the only other vendor that offers Solaris/UltraSPARC-based servers, and the two companies have a long-standing UltraSPARC development partnership in place."

The other option of a smaller and shrinking Sun after selling off either StorageTek or MySQL will not fly either, continued King.

"More importantly, de-linking Sun's highly integrated hardware and software platforms could result in significant challenges for Sun's customers. Such a move would likely inspire many to look to other vendors for their datacenter needs."

Meanwhile another industry observer predicted that only the largest IT players in Sun's space -- i.e. IBM, HP, EMC, Microsoft, Dell and Lenovo -- would survive the current financial downturn after downsizing to avoid too much red ink on their books.

"Sun was already in trouble when the collapse hit and of the vendors in their class is likely to be one of the first to fail," stated Rob Enderle, principal analyst at the Enderle Group.

The microprocessor vendor AMD might be the best candidate to acquire Sun since the major hardware and software players in IT are not all that interested in adding competitive Sun products to their portfolio, he continued.

"The problem for Sun is that no one really wants Solaris and much of their software business creates competitive problems [with Microsoft for example]."

Enderle ruled out HP, still in the process of digesting EDS and IBM, which has been reducing its hardware footprint in favor of services.

Meanwhile, Bill Moran, research director at Ptak, Noel & Associates, lamented that Sun has never been able to translate its "adventurous" approach to technological innovation into large profits.

He recalled, for instance, that Sun spent so much money on developing Java from which it was unable to get a sufficient return on its investment even though the technology swept the IT industry and beyond into cell phones.

"It would seem to me that before you get the product and get the channel involved, you have got to have a business strategy that makes sense, and Sun could not come up with that."

Sun has repositioned itself a number of times -- going from workstations to UNIX servers initially, taking on x 86 servers, and finally expanding into storage with the acquisition of StorageTek and open source with database software vendor MySQL.

"These [purchases] are Johnny-come-lately to some degree. It is hard to break [into new IT product categories.]. Sun is flailing away, it seems to me."

One "questionable" decision by Sun almost a year ago was its decision to spend $1-billion to acquire the Swedish based MySQL, Moran remarked.

Ultimately, Sun has to fall back on its loyal base of customers, added King. "Finally, I think it's important to remember that despite its ongoing problems Sun continues to drive $12 billion-plus in annual revenues. That number bespeaks a base of clients dedicated to the company's products. Unless it is capable of inspiring a large majority of those customers, I believe any sales strategy or acquisition deal involving Sun could do more damage than good."