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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."
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?
The Inquirer also has an article predicting the doom Sun. It references an article by Eric S. Raymond at Newsforge found here.
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 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.
Dell really represents a different market. They're a desktop provider first and a server provider second. Sun are the reverse.
I think Dell and Gateway's biggest success has been in pretty much cloning the IBM of the 80s, only at a fraction of the price. When you were buying IBM, you knew you were buying hardware that would last forever along with full support for as long as you were willing to pay for it.
Dell did exactly what IBM did, but did it with the same cheap parts you could get from anyone else. In the desktop market, you can get away with this much much much more than you can in the server market.
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
This guy has a reputation for doing this sort of thing, and more people need to know about it.
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.
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.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.