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Merrill Lynch Rips Sun
cosjef writes "In an open letter to Sun, an analyst for Merrill Lynch tells Sun to change or risk adding itself to the junkyard of formerly-great technology companies like DEC or Data General. The letter even recommends taking the helm away from McNealy, whose 'brash and contrarian personality have been synonymous with the company's image and success. Unfortunately, the act is getting old.' Sun's mistakes are well documented, but the biggest one is believing that what made them successful in the past would make them successful in the future."
The "analyst" here hasn't even talked to Sun execs for some time, is always negative on Sun, wants Sun to drop all their products that compete with Microsoft (pretty much) and force all their existing customers through a complete product and architecture change (by dumping SPARC), which would have them up in arms.
see here for some detail of "the loon" as The Register call him.
I used to read Steve Milunovich's research fairly regularly.
One of the advantages of reading Steve was that he did his own surveys of Fortune 100 (500?) CIOs, asking about budgets (ie future system vendor revenues) and various topics of the day (ERP deployments, etc). So I found his comments that Sun should make contrarian bets but "do so in ways palatable to conservative CIOs" interesting. Steve may have some unique insight into that.
What's a little odd to me about Steve's advice is the contradictions in it. At least based on the admittedly summary article linked here. On the one hand, he seems to advocate a "batten-down-the-hatches"-type strategy: cut R&D, dump SPARC (eventually), don't make waves, be more Linux friendly. And on the other hand he seems to say "make contrarian bets". It may be that Sun is just doomed due to volume economics (although in fairness, they have always been *way* more focused on that than every other Unix vendor in my past discussions with management I met in my past life), but the "batten-down-the-hatches" strategy seems more likely, not less likely to lead them down the "DEC, Data General, Compaq" path. Sure Sun needs to be shrewd and somewhat conservative in cutting excess spending. Maybe that *is* what they need to do to stabilize their stock a bit. But that isn't how they're going to avoid the 'computing graveyard'.
Although if you are doomed to the computing graveyard (something I thought was true of Sun in 1995 but Sun did stunningly well the following five years), it is true that the most prudent thing to do is spend your remaining strength as conservatively as possible. I don't have any easy answers myself for Sun. I can't fault Milunovich for trying, but the advice doesn't look particularly helpful to me.
--LP
For now. At "for now" is a very, very short time. Sun simply doesn't have the technology resources and financial wherewithal to make SPARC a mainstream, widely supported processor that is able to stay ahead of a rapidly accelerating market. IBM, AMD, and Intel are all shipping 64 bit chip sets and most of the hardware configurations being built around them will far outpace a comparably priced Sun box without busting a sweat.
Sun continues to rest on its laurels as the "premiere" platform for academic and scientific applications. Unfortunately, the market has long since overcome that fallacy and Sun will never recapture the high end workstation market for the simple reason that it no longer exists. Even moderately priced desktop boxes outperform Sun's best engineering workstations from just a year or two ago. So other than the ego boost ascribed to an academician with a Sun box on his desk, it's hard to argue there is any value in selecting that workstation option at this point. Sure, there are legacy software issues with stuff written to proprietary Sun graphics or clustering APIs, but that stuff all has non-proprietary solutions now that make porting quite easy.
Sun's only other market, high performance Internet servers, evaporated with the DotCom bubble. They're stuck holding a fist full of defaulted loans, cancelled leases, and warehouses of repossessed server boxes in the wake of that carnage. Nobody's interested in going that route again.
Seriously. If you want to spend $5000, $8000, or even $75,000 on a computer, you can go to Dell. But, if you're looking to drop $1.3 million on a computer, you go to Sun.
Now there's a brilliant reason to purchase a computer -- that it costs $1.3 million. Odds are likely 100% that you can purchase a superior system from a non-Sun manufacturer for an order of magnitude less now. You basically make Merrill's case for why Sun will be dead in 2 years. The pool of idiots willing to plunk down $1M for a box to serve web pages dried up 2 years ago. Look at how people do it now (i.e., Google, Yahoo, etc.) -- racks and racks of cheap, redundant commodity servers. Where's Sun's answer to that?
Bye, Sun!
Shut up and eat your vegetables!!!
Disclosure: I worked for SGI in the latter half of the 90s.
We competed with Sun. We found that the Sun machines could not hold a candle to the SGI (or IBM hardware, and occasionally the HP hardware when they got their heads out of their asses every few years). It was well known by our customers, and often repeated to us as a reason to bring us in, that Sun gear was simply not fast. It was quite hard to justify spending hundreds of thousands of dollars on gear when VPs desktops often were able to run some of the benchmark tests in similar time to the Sun gear.
Sun machines are not fast. They are quite slow. Solaris is not a paragon of stability. One of our customers pointed out their charts of availability to us. One of the most available machines was a PowerChallenge box I had set up in their computing center. Had been up and functioning under heavy load for something approaching 2 years, without an unplanned shutdown. One of the least available machines was the Cray SuperDragon^H^H^H^H^H^H^H^H^H^H^H^H^H Sun Starfire machine which was not able to stay up long enough to complete the benchmark acceptance suite. Many of our other customers noted this as well.
SGI is now a small fraction of its former self. It abandoned the Beast and Alien (2 amazing CPUs, due in 1999 and 2001 respectively), courtesy of Forest Basket and his inept reasoning, and went whole hog for Itanic. Some of us warned the company that this would be the undoing of the company. We were ignored. We were also right. Management had assured us that Itanic would take off, and be the next big thing. Yeah. Right. It appears now that the next big thing is Opteron. Too bad they bet the company on Itanic.
Sun has some similar choices ahead, though its technology is not really all that good. Some things are of interest, like the "java" desktop, which sounds like an S/ID card with a server and remote thin clients. Neat, but requires some serious networking infrastructure. Also, java aspect is irrelevant.
Java itself as a technology is a solution in search of a problem. Yeah, it is everywhere. Should it be? Is it really the correct solution to most of the problems? No, not by a long shot. The more I see it deployed, the larger the sale of a bridge I see... It is a language seeking to become an operating environment/system, targetting windows and everything else. It is supposed to be write once run anywhere, but the reality is "write 3 or 4 times and debug everywhere, and then grouse about how slow it is, while rabidly defending the decision, which you are questioning yourself, to use it for such a mission critical application".
Sun has some rather serious challenges ahead. Its hardware simply sucks rocks. Its software ain't all that good. Java is the jack of all trades, master of none.
Time for re-invention. Split out the SPARC, replace it with Opteron. Ditch lots of the software. Spin out Java. Give it a fighting chance to morph into something useful and find a real direction on its own. Sell off or close down the rest.
With McNealy at the helm, this will never happen.
And isn't Dell a larger company than Apple as well? Here's the snipplet from the Fortune.
"The Dell strategy, though, includes keeping R&D to a minimum--something foreign to Sun. Says Joy: "All along, Scott [McNealy, Sun's CEO] has maintained R&D spending, so there is some promising new technology coming too.""
Not cutting expenses while revenue going down = low or negative net income = stocks going downhill. Microsoft isn't in better shape than Sun due to their superior R&D, it's because of their superior marketing.
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