The Palo Alto, California-based company has been through a number of major changes in recent years as it has struggled to get back to revenue growth and long-term profitability following the dot-com collapse.
Those changes have included introducing support for Linux and x86 processors, the open sourcing of Solaris and other Java Enterprise System components, the landmark settlement and development agreement with Microsoft, the Sparc joint development agreement with Fujitsu Ltd, and a spate of recent acquisitions.
A lot of those big changes are about getting back to the core competencies of Sun that the bubble took us away from, Singer told ComputerWire. During the bubble period we got big fast and everything had to be Sun. The difference is you begin to believe you can do no wrong. We were in a bubble and we were the greatest beneficiary of that bubble. Those conditions changed and we had to change who we were.
Sun has in the past made great play of how different it is from its hardware competitors: while the likes of IBM Corp, Hewlett-Packard Co, and Dell Inc were adopting Linux and driving the up-take of x86 processor-based servers, Sun was sticking to its Sparc and Solaris processor and operating system.
Ultimately, that strategy failed the company as customers were looking for cheaper, smaller hardware. We missed the x86 thing, and Linux should have been ours to own, Singer admitted. A company that ignores the market is in great peril, it took us a while to acknowledge that this was the way the market was going.
While the company has now open sourced the Solaris operating system, adopted Advanced Micro Devices Inc’s Opteron processors, and struck the Advanced Product Line partnership with Fujitsu, Singer insisted that the company still wants to maintain its individuality.
The enjoyment of being different still exists, Sun still takes huge pride in being disruptive, he added. In the past couple of years there’s been a realization that you can introduce technology that’s disruptive, but do it in a way that’s constructive for our customers.
Singer cited Sun’s forthcoming Galaxy line of Operton-based servers, being created by Sun founder Andy Bechtolsheim in conjunction with AMD. What we’ve done with Galaxy is going to be land-changing in terms of what you can do with x86 in the data center. The real change is we’re back to having the best technology in the industry.
Singer added that the company continues to work on its own new Sparc processor developments, such as the future Niagara and Rock processors. We still have the largest R&D budget relative to revenue of any company in the industry, he said.
Singer also maintained that while Sun may have open sourced Solaris it has also invested heavily in the operating system, ensuring that customers can be assured that they are getting an enterprise strength operating system that they will not be locked in to. Open sourcing it gives people the confidence that Solaris is not going to lock them in, he said.
Open source’s best value is to keep the control of exit low. Everyone else’s business is based on lock-in. Our low cost of exit has hurt us in the last couple of years, he jokingly added. We’ve proved its real.
Singer maintained that open sourcing Solaris and other Java Enterprise System components – such as its Java System Application Server, web site authentication and web single sign-on technologies, and the Java System Enterprise Server Bus – would also provide a long-term growth plan for the company.
I think we’re building the community in the enterprise space and the academic space, and that’s the market we’re going for, he said. We have two communities that are very important to Sun – the enterprise community that has money, and the development community that doesn’t.
The development community wants Java components open source so they can play around with them, and the enterprise community wants cheap, available Java skills and resources, he added.
The goal of open sourcing the company’s Java Enterprise System components is to give Java developers an open source playground to play in and enterprise customers availability to Java engineers, skills and applications, he added.
While Sun may believe it is getting back to its core competencies, the true test of whether it has returned to form may come on 26 July when it announces its fourth quarter and full fiscal year 2005 financial results, which will give a good indication of the company’s potential turnaround.
After the company’s annual revenue hit a dot com driven high of $18.3bn in 2001 it dropped dramatically to $12.5bn the following year. Revenue continued to fall in 2003 and 2004 although the rate of decline slowed, with revenue hitting $11.4bn and then $11.2bn.
Analyst revenue predictions indicate that the company will slow the decline further with Tuesday’s results announcement, with estimates coming in at an average of $11.1bn, and a high estimate of $11.2bn, which would signal that the company had hit the bottom of its slide. Any result greater than that and the company can truly claim to have got its house in order.
