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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."
Unfortunately, many companies then made advertising and PR their primary products, slashing R&D because they thought they'd had their budget strategies wrong all along. Sun was king of this, apparently thinking a strong brand was what sold systems, not leading edge technology. Engineering went into the toilet, and now while Sun's still good at a few things, all but their most insanely-priced hardware is nothing better than what you get with off-the-shelf commodity components.
Today, people are researching to upgrade and evolve their server networks, not just grabbing the first implementation they think they understand. And that means it takes a lot more than McNealy's I-wanna-be-Steve-Jobs song and dance to sell product.
Newsforge
Would be to ape SCO in the hardware business. Claim that all hardware innovation after 1980 belongs to Sun. Doesn't matter if it's silly, as long as they can take Intel to court and threaten AMD :^).
If all else fails, they could get Windows to run on their servers, can't they?
-
If you keep throwing chairs, one day you'll break windows....
Sun will be fine. After the exit of the two companies mentioned in the story, they are the 64 bit and high end market provider now.
//Netmar uses sun machines. www.netmar.com
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.
For anyone that has used sun hardware, we know. It really can't be beat. The stuff is fast, scalable, and bulletproof. Sun OS is about as stable as they come.
~Will
sig?
Steven Milunovich, an analyst for Merrill Lynch, was dismissed from his post today. The official line from ML is that the "values and opinions of the report are not in line" with the company's.
Use ISO 8601 dates [YYYY-MM-DD]
The Inquirer also has an article predicting the doom Sun. It references an article by Eric S. Raymond at Newsforge found here.
Please please please leave Sun alone - after all, _they_ are running the business, therefore it's their responsability, no matter if success or failure happens.
The concerted "efforts" to "rescue" Sun, to bring it to the path of righteousness look very dubious to say the least: on one hand everybody and his sister seem to enjoy firing on this particular ambulance, on the other hand nobody seems to want to miss the feeding frenzy over some presumable defunct company. The last example was given by ESR: http://newsforge.com/article.pl?sid=03/10/02/12402 43.
Give the poor people a break!
I've worked for Sun in the late 70s and again in the mid-80s as a contractor
Good trick, that, to work for a company in the 70's that was founded in 1982. (with only 4 employees too) Sun Getting Started
Wheeeee.........Ah, I see that was an AC.
Bruce Perens, eh? I heard he was dead at 54? Truly an American Icon.
I've been an avid investor and it is my experience that the financial firms such as MerrylLynch, PriceWaterhouseCoopers and others have their own biased stance. They are either flogging a company so that a competitor will rise in value or just are simply wrong. Furthermore, I think you're describing Merryl Lynch's business model here. Marketing is how financial industry make money, hell they can sell you paper for your dollars, they gotta be doing a great job of marketing. Who's Wall Street to talk about substance? The whole financial industry is operating on hot air. Oh wait, hot air actually has some value.
I've worked for Sun in the late 70s and again in the mid-80s as a contractor.
Interesting... Since they didn't exist until 1983.
Even though Sun may have lost their chief scientist, Bruce Perens
You mean Bill Joy?
I mean... let' run through some arguments here:
1) if they are so good at analyzing the market and which company will do good / do bad, why arn't they sitting around with billions, but instead slaves away at financial institutions?
2) how many analysts spoke out at the beginning of the dot com bubble insightfully? (i.e. "this won't last?") IIRC everyone, yes including the analysts, were basically like "hey everybody what a wonderful opportunity! buy buy buy!"
3) AFAIK analyst predictions on stock / company performance has never been any more accurate than random guesses or predictions from a layman (within error tolerance) - I believe the reference was fool.com;
so, can anybody GIVE me a reason why market analysts should be trusted for their opinions? Besides that they went through a couple years of economy schoool (which, according to my acquaintance studying economy, is mostly like astrology)?
My life in the land of the rising sun.
Sun is in dire straits, based on their latest PR campaign ("The Sun Java System") they have abandoned any semblance of technology in their technology. In a nutshell, "The Sun Java System is a radical new approach for synchronizing IT investments with business priorities by decreasing IT costs." How does this have anything to do with IT? What kind of _product_ is this?
Meanwhile, they seem to be able to demonstrate a positive cashflow even with a tough economic climate. This is a good thing, but they continue to have "one-time" expense every other quarter.
Merrill is wrong when it comes to R&D, this is clearly the only thing that can save Sun now. You don't win in the technology game by promising things like the Sun Java System; you win by demonstrating technology that cannot be obtained elsewhere.
Eric Sarjeant
eric[@]sarjeant.com
The only product of Sun's I know about and they didn't mention it once. If microsoft alledgedly make all their money from MS Office, couldn't Star Office be a huge revenue stream for Sun if it competes favorably for price?
I've worked for Sun in the late 70s and again in the mid-80s
You do realize that was nearly two decades ago? That's like a century in computer years.
Mad Hatter
Who are these moderators? This one is WAY too obvious...
Sun was founded in 1982... see Sun's website
Bruce Perens worked for HP... see article here
The Checkpoint firewall is not a Sun product... see Checkpoint Software Technologies
Both SGI and Sun were killed (past tense) by commodity hardware that was "good enough" to take away their sales even before they stopped innovating. In SGI's case, they panicked believing Itanium would come out in 1997 and kill them. They tried to switch to commodity hardware but couldn't stomach it and the dithering ate away at them. Itanium still sucks to this day (but MIPS could never break 1Ghz...).
.com boom of 2000. Now they're getting killed by Dells at the low end and grids at the high end. They have a huge number of employees because the company is feeding off historical service contracts (the same thing that's keeping SGI on life support). Sun needs to shrink, simplify, and focus or they'll be dead in 10 years also.
Sun fell down on the workstation side a long time ago, but their servers were hot thru the
...that most Merill Lynch analysts were yelling "buy! buy!" in 2000.
That said, I think Sun is already dead. Two billion in cash is all that is keeping the corpse from rotting.
Sun becoming a big player in the linux world, after all, solaris is one of the most stable version of unix out there. It wouldnt surprise me in the least if we see a headline in 5 years stating that SUN microsystems has merged with a large linux company (redhat perhaps?)
This sig was generated by a barrel of trained kittens for SeXy_Red (550409).
tr = new Translation(from = Marketspeak, to = English)
tr < OpenLetterToSun
I have shorted the shit out of Sun stock, and now I want it to go down like a Clinton Intern. I will now rip you a new one in an "open" letter targeted not at Sun but rather at the sheeple who day trade.
Once your stock price bombs out, I will make a killing, then buy in at the lower price. After that, expect another "open" letter praising Sun to the heavens, in order to pump the stock back up.
God, I love being a market manipulator^Wanalyst.
<EOF>
delete tr;
www.eFax.com are spammers
Let's not forget Merrill Lynch had Enron as a buy even after employees were seen leaving the building in the 100's with boxes in their hands.
As a former quantative analyst, I can say this about the larger brokerage houses. They have an agenda. If they can generate enough hype (up or down) about a company, true or not, they wind up right, because the uneducated/ignorant masses follow their "leads" like lemmings. It's a simple business from ML's perspective. If you build it (the hype) the will come.
Saying Android is a family of phones is akin to saying Linux is a family of PCs.
Disclaimer: I am not a Sun employee and own no stocks but I do contracting work for them and like the company.
;) Sparc will probably marginalize in the long run (not in the next two three years though).
Saying that Sun is focused on marketing more than technology is rediculous to anyone who knows the company from inside. Sun makes computers in the high end that few can compete with. Up to 4 CPU's go with Intel+Linux but when we go over to 8 or 16 cpu's then both cost and performance are on Sun's side.
However Linux+Intel/AMD/PPC(IBM) are getting much better and cheaper and at a point I guess Sun won't be able to compete on the hardware side, and like SGI before it will have to make a switch and let go of the large margines etc...
I feel that Sun can survive that switch, its one of the best managed companies I worked with, thats a true live demonstration of how their own technology can be used to make the employees life easier.
A simplified view would look at Sun's declining server sales and say thats it... However Sun is huge and makes zillions of other things:
1. CPU's and special hardware - Sun ray is actually selling well and limited only by the lack of marketing drive to sell it. It works with Linux also so it allows cheaper deployment.
2. Sun owns Cobalt that make great Linux boxes.
3. Sun has a huge software stack including Solaris (that has quite a few features still missing from Windows/Linux) and star office. This allows Sun to offer an almost full hardware+software stack (including the application server) with the only thing missing being a database server. Only few companies can seriously compete in this level.
4. Sun has several divisions that do outsourcing work for many global companies including cellular operators etc...
Sun has many revenue streams many of which won't dry up even if the whole world left Sparc+Solaris and moved to Linux+Intel.
The reasons for Suns decline are:
1. Moving to Linux+Intel - yes it has a serious effect on the company and changes need to be made.
2. Dot com failure - Suns biggest clients were the dot coms and when they bombed Sun is trying to move into traditional industries. This takes time.
The Sun will rise again although I doubt the Sparc will be there
I have no doubt that these guys can pull it off though.
Mainly in that their recently announce hardware and software solutions don't exist in the physical form.
So they are selling what? A roadmap to the future? Software and hardware vaporware?
* Winners compare their achievements to their goals, losers compare theirs to that of others.
This guy has a reputation for doing this sort of thing, and more people need to know about it.
now wouldn't that be a good MS killer uber merger?
- sun for their server kit
- novell for their networking
- apple for desktops
- os would be jointly developed using the fantastic ximian guys, the OSX team and the JAVA boys.
My alma matta was one of the largest Dec Sites in the country in the early 80's. All the universities infrastructure systems DEC systems and their was a mandate that all incoming students by DEC PC-350's. The net effect was there was no way to avoid the product line.
Funny thing was while some of the equipment (VAX-xxxx, PDP-11 series) were excellent, most of it was an incredible pain. The PC-350 were based on the PDP-11 architecture but wouldn't run any of the common PDP-11 operating systems. Whats more the 350's couldn't even format their own floppies. The mainframes (DEC-10,DEC-20) while solid systems suffered from unique features, 36 bit word size was my favorite.
Anyway, at one point Ken Olsen, the then CEO of DEC came to give a speach/pep talk about the great advances we were making and how wonderfull DEC would be in the future. In his q/a session he had 3000 angry engineers asking him how his company could foist off pieces of crap like the 350. His response was that we lacked an understanding of how his business worked.
DEC is but one. Technology companies must understand that they are about serving customer needs, not their own arrogance. I can go down the list of for days citing companies that either felt they were successfull so nothing could happen, or they were unique and nothing would happen, or they were just plain arrogant.
Scott Mcnealy has always been on the plain arrogant side. Suns products have always been priced very high, and they have never been willing to make the effort to penetrate mass markets. The funny thing is I really love their equipment, the same way I really love apples. The problem is I can't bring myself to buy it or recommend it in most circumstances.
And it's good to look at the fact that it only reflects the beliefs of people who are geed-aware enough to trade shares. Most of these people are usually uninformed enough about reality as to trust the firm-provided analysts when they say things like that SCO's IP-blackmail business plan will be a complete boom.
See SCO's trades rising? That has nothing to do with reality, as anyone who recognize the nonsense in the phrase "I own UNIX" can tell.
Several financial firms seem to have already spoken about the "critical" and "wrong" situation of Sun Microsystems and exactly which percentage of layoffs they shall apply. Maybe they're right, but, as usual with analysts and their habit to work on none or little real information, I'd say they guess, as they do most of the time.
That is, if they're not actually trying to trigger some share-price-waves for their own benefit.
Personality leaks in the company may be a better indicator to use, and the fact that their upper layers are trying to ignore the Free Software/Open Source phenomenon (just like Microsoft did before; they no longer do; they now have a "Linux Chief" for a "Linux Strategy" consisting on destroying Linux) shows they have the same short sight that Microsoft did. However Microsoft has a lot of money from their dominant business, that buys them some time to try to react, whereas Sun may have not so much time left.
Will they want to see the lion running on them for a meal? I hope they'll do. But pretending to see the future would be behaving like all those financial analysts.
But if they go down in the end, I only hope Java gets open-sourced, rather than it getting bought by Microsoft in order to shut down the technology.
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
Solaris is critical to why users like Sun. Being late to Linux is unforgivable both because Linux is a kissing cousin to Unix and because Linux is a disruptive threat to Microsoft.
Sun needs to convince users that Linux is a subset of Solaris and push two messages: (1) if you're doing Linux, go to the Unix expert, and (2) use Linux on the edge, but when you need mission-critical capability it's time to graduate to Solaris.
That's incredible. Since when should a technology company be worried about disrupting a competitor? Nuts. Sun should make all the money it can and if it does so by taking share from a competitor's inferior offerings, that's great. Merrill Lynch is attempting to halt technological progress in order to protect it's worthless Microsoft holdings. This is ass backward, they should be looking out for their investors by urging them to sell Microsoft.
Friends don't help friends install M$ junk.
- To benefit the analyst (bonuses etc.)
- To benefit the bank or banking clients (see point 1)
- Publicity
The good of the standard investor or the company being invested in doesn't even come into it. The fact he's made this an open letter means he needs Sun's stock to move for one reason or another.But my experience with Merrill Lynch and my brother's experience likewise is that they are without integrity. Therefore, you cannot trust anything they say.
Just as an example, you read their advice to "convince Linux users that Linux is a subset of Solaris..."
Bud, that ain't going to happen. SCO is too busy with the exact same thing. And yes, it's great for their stock price, especially since a Microsoft-club investor is buying up as much stock as they can.
But SCO isn't healthy.
Of course, their other advice, to slash the workforce, is also in the same line: it is detrimental to the health of Sun. Let me explain what happens when you slash the work force.
First of all, all those employees who thought that they had reasonable job security, get depressed. Depression means more time wasted. It means decreased efficiency. That means more cuts, down the road. Eventually, it means you outsource everything, and end up as a shell (though maybe an IP shell like SCO, which generates lots of volatility, which might be good for Merrill Lynch).
Second of all, when you cut the workforce, employees get paranoid. That means that they start to decide that they don't have the authority to stick up (the nail that sticks up, getting hammered and all). So they don't try to innovate. In fact, they squelch innovation. They try to make it look like they're doing as good a job as anyone else, and aside from that avoid notice.
Worse than that, it sickens the company in another way: ...
Suppose you have n employees. The internal threats to a company are a function of the number of employees. A failure can happen with any one of the n employees. Or it can happen with any group of 2 employees. Or with 3 employees. All together, the probability of a failure occurring is
n + n*(n-1)/2 + n*(n-1)*(n-2)/6 +
Now, at the same time, employees don't like to see their company fail, so they do try to fix things. But their ability to fix things is a function of their authority. If their authority is not enough to fix it, then the fix won't happen, and the company takes a loss of some amount. So the same equation as above applies to the number of employees with authority: ...
a+a*(a-1)/2+a*(a-1)*(a-2)/6 +
Of course, a is less than n. So the health of a company is greater if a=n, or is as large as possible. But when you're making cuts, even employees who are nominally with authority act like they have no authority. So every single little cold, every single angry statement, every single office affair hurts the company and results in real damages.
So Sun, Don't Listen to Merrill Lynch. Unless you first exchange all your stock for all of theirs in a 100%-100% stock swap. It might not be a bad idea, at that. From the open letter, I'm sure Merrill's market analysts know how to build hardware and write software. And at that, I'd trust you guys with my assets a lot sooner than I'd trust them.
Correct Horse Battery Staple: 72 bits of entropy. Enter "Correct H" into google. When it generates the phrase, that's
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.
1f u c4n r34d th1s u r34lly n33d t0 g37 l41d
1) The numbers don't lie. Sunw's numbers are awful and getting worse. These numbers cut out of the yahoo profile:
Earnings Per Share (ttm): -0.75
Profitability
Profit Margin (ttm): -29.99%
Operating Margin (ttm): -23.82%
Management Effectiveness
Return on Assets (ttm): -23.85%
Return on Equity (ttm): -42.61%
2) Consider the competition. NUMA, RCU, and JFS, for Linux just came out within the last year. Also within the last year: 64-bit processors from AMD, Intel, and Mototola. The competition is catching up fast, and not just on the low end.
Sun seems to be displaying the same behavior as a small retail shop being outed by a new supercenter. Instead of trying to innovate, Sun is holding on to its existing business model for dear life. The only difference in this scenario, is that the supercenter is Linux on commodity hardware.
When Java was released, it was quite obvious what it was. Sun saw that wide-appeal applications weren't being developed/ported on/to Sun platforms. The OSS productivity application suits were still pretty much in their infancy if even existing and Windows was where stuff was happening (Linux still being a tiny blip on the radar at that time). They knew that Sun also needed things like productivity packages and such applications to "round out" their offerings so they could continue to market their homogenous system workplace because many sites were forced to also bring in Windows boxes because Suns couldn't be the complete solution.
So, Sun came up with this language/system that incorporated many of the latest/best programming features with the additional benefit (especially to them) of being portable - called Java and if they could convert folks to Java, then Sun could get its applications for "free" no matter what platform the application was originally developed on.
Overall it has been somewhat of a success for Sun except that Linux started becoming interesting (even to some degree being enabled by Java) and eroding their workstation/desktop sales. With this new platform, you could still buy a Sun server for the stuff the servers are supposed to do but go with Linux clients. This isn't what Sun wanted. Java is close to what they wanted but it still requires a bit of work to port Java apps across JVMs at times.
At least to me, it is interesting to see how an effort by them to bolster and strengthen their offerings against Windows encroachment (and basically leech off of other development efforts in effect) also helps what is now one of their biggest non-Windows competitors take marketshare away from them.
I've used Suns before there was a Sparc all the way up to the E10k and have liked their hardware and support quite well. They've always had a problem offering the complete spectrum of applications even though they tried to be the whole solution.
eh? Are you talking about on a %-age-of-revenue thing, or in absolute terms? I think Apple spends as a % of revenue quite a bit because they're using non-standard hardware, and so can't leverage off other's work (their Q&A, testing etc. also costs them more).
On absolute terms though I wouldn't be surprised if Dell spends more than Apple - their revenues must be significantly bigger (their profits definitely are...).
But I distinctly remember in one interview Micheal Dell himself saying that one of the reasons for Dell's success was that they didn't spend anything on R&D (this was in their much earlier days) and (together with other factors) as a result would always have better margins than everyone else. Some of my engineering friends have always felt this distaste for Dell ever since then.
Anybody out there have a link to an archive of this or anything?
Let me give you one crystal clear example of how Sun is its own worst enemy...
J2EE certification....
JBoss which is one of the only Open Source J2EE providers still cannot call themselves a J2EE provider. (Maybe recently solved).
Why is this?
Well, it lies because Sun made it that to become a J2EE member you have to oodles of money, and then you have pay more oodles of money to part of the official "J2EE" club.
Sun has this elitist attitude that says, "Oh, this will cost you because it is meant to be good". And NO WAY THAT WE WILL HAVE OPEN SOURCE cheapen the J2EE products. It reminds me of a Ferrari dealer telling me a Ferrari is better than any other vehicle...
Well, lad-di-da, I just want a car to go from point a to b, maybe carry the kids, dogs, and wife. Sure these "simple" cars are not as glamerous, but at least there is a business.
Now before somebody correct me on how well Ferrari is doing, let me remind them that their parent (Fiat) is dying and Ferrari is only doing better because they bought Maserrati. Maserrati sells for a fraction of a Ferrari, about the same as a high end BMW. Which again proves the point, that businesses grow when things are affordable... This is something that Sun just does not want to learn!
"You can't make a race horse of a pig"
"No," said Samuel, "but you can make very fast pig"
Where to begin?
This guy tells us what everybody already knows: Sun's not going well, the stock is plummeting, sales are low, market shares are shrinking, their position in the server market is unsustainable... Thank you buddy!! Do you realize all of this already hit the mainstream media? It's not news for anyone who just follows the tech industry casually. Add some obvious generalities : "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." All in all, we have a random guy trying to make us believe that he's smart.
So long for the diagnosis. And what cure does he suggest? Cut and focus, fire the CEO, be acquired... blah, blah, blah... Standard cut&paste from recommandations to ANY firm that's not doing well.
This "open letter" would have been useful 2 or 3 years ago. It would have been interesting if Merril had a clue about what's really going on at Sun and which options they have left.
Analysis involves more than reading the press, going through the accounts and talking to the CEO twice per year. If you want to have any informed opinion on a large company (especially in the tech sector), you need to talk to R&D, talk to the product marketing guys, appraise the quality of the people, have a clue to where the industry is going, evaluate customers' and employees' loyalty...
That's a tough job. Far tougher than picking easy scapegoats (McNealy). If you're not prepared to do it, better find a real job.
It would be nice to be sure of anything the way some people are of everything.
I work in the financial services industry. Bear in mind that analysts are paid by banks, not by you. There's no reason for him to give you the 'benefit' of his wisdom whatsoever. Open-market advice is given for three reasons:
To benefit the analyst (bonuses etc.)
To benefit the bank or banking clients (see point 1)
Publicity
The good of the standard investor or the company being invested in doesn't even come into it. The fact he's made this an open letter means he needs Sun's stock to move for one reason or another.
Let me remind you that when you buy stocks, it is the banks who sell them to you. They can sell you stocks at the offered price whether they have stocks on hand or not. The SEC authorizes market makers (banks/brokerages) to sell stock short if they don't have enough shares to maintain the bid/ask. Consequently, any given bank can end up with a large amount of stocks either long or short at the end of the day. Now if they raise the bid/ask the next day when they're short, they lose money immediately. Why would you make yourself lose money? It is common sense. If too many people bought the damn stock, heck squeeze them for ten years if thats what it takes.
Now before you say banks all compete against each other, I'd like to point out that it is/was a common practice for banks to borrow cash from each other in times of difficulties (such as too many people showed up to demand cash out of the electronic accounts).
Everyone has failed to recognize that as the admin market has been flooded to the ninth with MS Certified everybody since the late 90's.
That means it is far more likely for a younger admin to recommend a MS or Linux system then it is to recommend Sun.
The last time I checked I did not see any Sun Certified traiing available at me local career or community college! (:-
While you and I know that Sun should have embraced free software long ago, ML's Milunovich recomends just the opposite. Recomending that Sun make it clear that they "aggresively support Linux" he also recomends that Sun cut it's own development efforts, " [Sun's]Solaris, Linux, Orion, Mad Hatter, N1, SPARC, x86, storage, Java-'The Network is the Computer' tent is bursting at the seams," he wrote of some of Sun's main product and services lines. You can imagine what kind of headlines MSNBC would come up with if Sun were to drop any of it's free software efforts.
The rest of the message looked like it came straight from a M$ press release. What's lower than a "corpse" in a "nitch" at the bottom of a "tech ravine"? They might as well have called the company whale shit. The personal comments directed at Scott McNealy, while typical of Microsoft name calling, have no place in profesional advice.
Friends don't help friends install M$ junk.
Isn't this the guy that predicted Microsoft was inevitably doomed by 2004 or so? Because the profit margin had nowhere to go? Doomed. He seems to use that word a lot.
Sun isn't going anywhere, and if the Merrill Lynch "open letter" was an official company communication, I'll be shocked. Anyone wanna bet that the guys that wrote it will be called in on the carpet for exposing it publicly? Most public evaluations of companies aren't put into such informal language. "His act is getting old" is a bit suspect.
Sun has 5 billion in cash reserves, and a profitable high end server business that will shrink somewhat, but not completely. It's utterly foolish to write this company off at this point. I know it's a popular thing to do around here becaue of the way they play footsie with Linux, but I'm afraid you all are going to be dissapointed if you're waiting for Sun to go belly up, or be bought out anytime soon.
Oh, and Eric should stick to open source advocacy. Because his economic predictions are kind of suspect at this point....
Life is hard, and the world is cruel
"Overall it has been somewhat of a success for Sun except that Linux started becoming interesting (even to some degree being enabled by Java) and eroding their workstation/desktop sales."
In my experience that's not exactly what is happening. Unix desktop sales were a dead end in the mid/late 90's. Performance improvement on x86 made them irrelevant even in the high end desktop space. So, corporations were starting to look at replacing them with Windows where the workers also had access to other company standard products.
However, in the late 90's Linux started becoming a viable alternative. Combined with better desktop than CDE, more stable than Windows, less porting of unix applications needed, viable solutions for MS software through vmware/wine/ooffice, it became a usable compromise with the best of both worlds. An alternative to switching to Windows, not an alternative to staying with Sun/HP/SGI/IBM.
The marketshare that Linux is taking from Sun and other Unixes is marketshare they've already lost. The fact that it's going to Linux does not change that it would have gone to MS otherwise.
Sun shouldnt fret about marketshare lost to Linux. Sun should be grateful about it because that, at least, allows them to stay in the game, which they wouldnt be able to do if the marketshare was lost to Windows instead.
Sun puts all its energy into the Solaris scalability features, and ignores some pretty basic things that make the operating system have the flavor of a Victrola.
Let's just run through a few of the problems:
Sun has this attitude of "if it's not in the SVR4 codebase, then it doesn't go into the Solaris base install." This is just dumb. I realize that it is important to preserve compatibility for old shell scripts and utilities, and that Sun has taken some strides with Gnome and perl integration, but 95% of the new and interesting work in UNIX is taking place in the GPL and BSD spheres of influence, which Sun mostly ignores.
In many respects, Solaris has been at a standstill for the past 10 years.
What would Dell spend R&D money ON? Comparing Dell to Sun is silly. Sun = Dell + Microsoft + Intel. Dell is just the shipping and receiving department of DellWinTel.
We're a networking systems company and we were standardized on Sun systems until a couple of years ago. What changed? We added Linux x86 to the mix. Why? Speed gains in the 2x range for simulation, synthesis and timing analysis of our ASICs. Oh yeah, and the boxes were (back then) $2K instead of $10K for similar configurations (yeah, 32-bit vs. 64-bit, but I'm talking application performance not system capability/capacity at the moment). A few years ago we bought several 4500s with 8 CPUs/20GB memory and they are still in use today, although are eschewed by the engineers except for high-capacity jobs the x86 boxes can't handle.
And this is where Sun *still* shines. We've run benchmarks on multi-CPU x86 boxes up through the latest Xeons and we're underwhelmed to say the least. Unfortunately, the code we run is optimized for the P3 architecture and just doesn't run that well on P4. Also, the memory architecture sucks compared to Sun; a second job running on one of those Xeon systems brings the performance of the first job WAY down (not due to CPU switching; we used a special kernel that eliminated most of that). This does NOT happen on our 4-year old Sun systems. Itanium systems are insane expensive (more than an equivalent Sun system these days) and Opteron is just becoming available from tier-1 OEMs. We'll look at the Opteron as soon as we can get our paws on one, believe me.
And if you're talking large memory footprints, Sun is just about the only way to go for our applications. We just bought a new Sun system for our high-end jobs that need gigs of memory. The old 4500s are still working but they're a bit slow.
Our future is bound to include Sun for the forseeable future, but the Opteron systems may reduce how many Sun systems we buy in the future. If Sun could make a profit on such a reduced volume (high-end servers instead of desktops, mid-range and high-end servers together) it would be great. But it's hard to be in a low-volume business and maintain profits; I suspect they won't survive in their current incarnation.
My main point (you didn't know I had one, did you?) is that there are some things that Sun does *very* well and they have no real peer. Oh, you can talk about IBM or HP, but will my EDA applications run there? Nope, so it's a moot point. The installed based gives Sun the edge there, even if their system architecture could be shown to be lacking with respect to those vendors.
I hope StarOffice gives them a leg up on the desktop, be it on Sun hardware or otherwise. It's a solid product; just wish they had brought it out a couple of years ago in its present form.
- Leo
You don't use science to show that you're right, you use science to become right.
But, if you're looking to drop $1.3 million on a computer, you go to Sun.
Just because Sun overcharges for their computers doesn't make them a "high-end market provider".
If I'm going to spend $1.3 million on a computer, I might just as well go with IBM. Of, depending on the application, set up a large cluster out of PC hardware, like Google and many other companies.
As far as I can tell, the only thing that has been keeping Sun above water is the fact that they used to have proven, high-end multi-processor machines, which you need if you use a large, non-distributed database. But with the increasing availability of distributed databases, very high speed networks, and people who are getting smarter about distributed systems, the importance of that is fading fast. And, of course, IBM in particular has added high-end UNIX machines to their offerings, in addition to their mainframes. In fact, much of Sun's remaining business was business that Sun had taken away over the years from IBM and that is now going back to IBM (the other big part of Sun's business was academia and research, but I don't see Sun being a dominant player there anymore).
Sun OS is about as stable as they come.
Actually, Sun is running Solaris now. And their OS has had plenty of serious bugs over the years. Furthermore, it simply isn't competitive. If it came on the market today, it would be laughed at. The only reason why people are still using it is because they have been using it for years.
Believe it: Sun is in trouble.
I am not too sure why people think that Sun should go the Opteron route. Just because the Opteron is new and sexy does not mean it is a better architecture than the SPARC. Opteron is targeted as a connection strategy for people that are on Windows platform, and need a 64 bit solution. While this will not be the case if MS doesn't support the Opteron, currently the Opteron is performing the same role for the Linux Market. 32 bit apps run on it fine, and you can get the few critical applications tweaked for 64 bit to get the full power you need.
SPARC has no such need for backward compatability. SPARC runs solaris apps, all of which are 64 bit native. They can optimize for it with out have to have a parallel instruction path for 32 bit apps. There are years of upon years of scientist time dedicated to optimizing the SPARC chip, and tuning the Solaris code to make the most of it.
Saying that Sun should abandon SPARC for Opteron hides a fundamental difference between these two processors.
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