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October 17, 1999

McNealy, the Internet Toothbrush, & the “Big C++ Hairball”

By CBR Staff Writer

By Phil Jones

Did anyone believe the rumors that Scott McNealy has decided to ease up on his war of words with Microsoft? Well more fool you. Sun Microsystems’ ebullient CEO passed through London last week en route from the Telecom 99 in Geneva, and took time out to, ostensibly, share his view of our internet future with a small group of interested reporters. But he didn’t stop there.

While handling his brand new GSM WAP phone, McNealy opened his assessment of the current state of play in the internet world with the not entirely surprising observation that this wireless thing is really taking off. And McNealy clearly believes that the wireless thing is a pretty good idea.

With wireless devices proliferating faster than flies on a carcass, McNealy made it clear that he is looking forward to the time, already almost upon us, when accessing the internet will be about much more than using a PC. Today, said McNealy, we’re on track for everything with a digital or electronic heartbeat to be on the internet.

Items with digital heartbeats, according to McNealy, range from the latest electric toothbrushes supporting 3,000 lines, the internet-enabled automobile (Java machines with tires), to the proliferating population of Sun Solaris server platforms, each running approximately 13 million lines of code. It is an open market, and anyone can play, he reckons the Sun chief and there is only likely to be one big loser. Windows NT, says McNealy, is a big C++ hairball which nobody needs anymore. With all the applications, and all the complexity of information technology being sucked into the network no one needs 40 million lines of code on the desktop, and an increasing number of internet service providers are beginning to realize they don’t need it in the data center either.

McNealy’s evidence for this is Sun’s successful penetration of the data center of 15 of the world’s 20 largest internet service providers, and the record shipments of workgroup servers that his company revealed in its first quarter report last Thursday. At time when Hewlett-Packard, another company with pretensions to e-business dominance, is seeing hardware sales grow by around 3%, said McNealy, Sun’s product sales are powering ahead by 23%.

But aren’t there still more servers out there running NT, than there are running Solaris? Sure, says McNealy but this isn’t about how many stalls you have, its about how many hamburgers you sell.

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What’s bad for Windows NT resellers like Hewlett-Packard is, of course, bad for Microsoft, and the conditions are getting worse all the time. Sun’s quasi-open source Solaris policy, the growth of Linux, and the success Sun has achieved in freely distributing StaOffice (a ubiquitous client interface to our StarPortal) are each examples of trends that are putting the squeeze on Microsoft. The company, which used to boast about Windows everywhere, is starting to come to terms with the fact that when the multiplying flies of internet access devices are factored into the equation, Windows is now just a subset of the Java virtual machine installed base. Java is the flies, Windows is the carcass.

Financially speaking, the ebb tide may not actually have reached Redmond yet, but McNealy believes it is on the way, and he argues that Microsoft already knows it. Microsoft, he said, has found out it has no way to make money in the internet market, and they have no good ideas. Instead, Microsoft is looking at a choice of exit strategies he says, and there are three things it can do with its money: they can give it back to their shareholders, they can put it into products to get a better return on investment, or they can be a portfolio manager for their shareholders by investing in other companies.

According to McNealy, Microsoft’s recent spate of internet stock investments show that it has chosen option three: they’re buying a portfolio to manage for their shareholders. McNealy isn’t entirely happy with this development, and would clearly like to see it stopped. Where they can, he claims, Microsoft buys into businesses (AT&T and Comcast) to to try and force them, in a not very legal way, to use their technology when they wouldn’t normally do so.

This tactic is Chapter 1, Buying Your Customer, in the book of monopoly practice, says McNealy, and Microsoft is perfecting it. They buy just enough to stay under Hart-Scott-Rodino [the US’ anti-competitive practice laws], he said, and it is time someone subjected this practice to close scrutiny.

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