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Sun Microsystems, a CEO's Last Stand?

pillageplunder writes "Businessweek's cover article is a sharp look at Sun Microsystems. The gist of the article? That its fall can be laid at the Feet of its CEO, Scott McNealy. Overall, a balanced read, one that does a good recap of the the high and the very low low's that Sun has reached under McNealy."

33 of 257 comments (clear)

  1. Classical big-company problem by Bruce+Perens · · Score: 5, Insightful
    Sun is stuck in making a transition from high-margin products to low-margin ones. Their workstations had 70% margins in their heyday. Linux and MS Windows have eaten that market - 5 years later than people outside of Sun thought it would happen, but it happened. But Sun can't make the transition to low-margin products without damaging the remainder of their high-margin ones, and they can't accept that. So, expect them to behave as if their low-margin products are directed at the high-margin products of other companies while simultaneously attempting to protect their own high-margin products from their own low-margin ones. The result is that they will exhibit a sort of corporate multiple-personality disorder, something evident with Sun for several years.

    Bruce

    1. Re:Classical big-company problem by Enquest · · Score: 1, Insightful

      The era of the big IT company may well be at an ending due Free & open source. I think the company's will be the one's like Mandrake!

    2. Re:Classical big-company problem by scoove · · Score: 5, Insightful

      Sun can't make the transition to low-margin products without damaging the remainder of their high-margin ones

      Clayton Christensen has got to be mildly amused at Sun's disposition (and probably wondering why McNealy didn't fork out the $12 bucks to buy his rather significant book).

      This is classic high-margin "focusing and developing your product line's evolution on your top 5% customers" as well as a clear non-response to Clayton's "trivial technology" via Sun's insistence that Linux could not do what Solaris does.

      In the mid-90s, I began predicting Sun's demise when we encountered their Netra Internet "server" fiasco. Sun took a Sparc5, completely crippled its OS, removed its video card (serial or network interface - progressive, eh?), and then made misrepresentations as to what software was included. For instance, it was billed as a web server - but in actuality, it had a FTP server and a copy of Mosaic client software for download. Wala... it was "serving up web software."

      Having bought several dozens of these based on Sun's misrepresentations, the only salvation was to buy video cards, full Solaris licenses (with a C compiler which was also excluded from the Netra) and make them a Sparc5 once again (at well over the cost of simply purchasing a Sparc5). Not only was the Sun product manager's response mystifying (blaming the customer for having unique and special needs - what, running http as falsely advertised?), but even more amusing was that no Sun support group had any awareness of this product.

      More revealing, however, was that Netra was a stillborne attempt to enter lower margin (ala 40%?) products without threatening the cash cow. It failed miserably and I would expect some of the behind-the-scenes politics might explain why support knew nothing of the product and why it was permitted to leave Sun crippled to the point of unusability. Shortly after my public criticism, it was pulled.

      I encountered similar high-marginosis several years later when Sun was pushed as a required platform for numerous Lucent products. The gifted Linux and FreeBSD work of an company employee allowed several thousand dollars worth of Intel hardware to replace quarter-million dollar Sun servers.

      As Bruce writes, I'd suggest Sun's high-margin cash-cow myopia goes back well into the early 90s, when according to Clayton's theory, the time to respond to Linux and *BSD was immediate. It'd be interesting if others have Sun experiences, especially with respect to any lower-margin product introductions/failures, that might further illustrate Sun's trouble.

      *scoove*

    3. Re:Classical big-company problem by davecb · · Score: 3, Insightful
      Bruce Perens wrote: Sun is stuck in making a transition from high-margin products to low-margin ones

      I think that's true in the low-end-product space, but that isn't where Sun is making money or where they're putting their effort. The part of the business that was most successful was servers, initially just retargeted workstations and small multiprocessors, and eventually medium and large multiprocessors.

      The opportunity in the server space is to significantly lower the cost per unit work, something which I expect the whole industry to be doing in a few years.

      Right now, Sun and IBM have their first dual-core chipsets out, in small quantities and starting with the medium-to-large server markets. The big cost reduction will be when they, (and AMD, and probably SGI), have 8- and 16-way multithreaded chips out. These deal with the huge mismatch between CPU and memory speed, and will be able to saturate a modern memory bus by running enough threads to keep the ALUs earning their keep even when individual threads are blocked waiting on a fetch.

      At that time, we'll see something like a 10:1 or perhaps 30:1 jump in price-performance. Which, I claim, is A Good Thing (;-))

      This, in turn, means the competition will be once again in the server market, where the middle and large ends are both high-margin, and a significant jump in price-perfromance will justify the margins.

      I do eventually expect to see low-end multi-threaded chips, probably in blade or 1U enclosures, for a relatively high price per unit but with a very high price-performance offsetting that.

      --dave

      --
      davecb@spamcop.net
    4. Re:Classical big-company problem by Bruce+Perens · · Score: 4, Insightful
      I would propose as the cardinal sin of the computer industry: protecting your own higher-priced or older products from your own newer, lower-priced products. This was a primary contributor to DEC's demise. When the VAX 750 came out, it really could have been as fast as a 780. For a while there was an aftermarket kit to un-cripple it so that it would indeed have performance close to a 780. But having a much cheaper machine of similar performance available would have hurt those high-margin 780 sales, and worse, would make the people who had just caused their companies to buy big-ticket 780's to look stupid or even lose their jobs.

      But nobody made Sun protect DEC's lines. So, Sun won. Sun seems to have forgotten that lesson.

      Bruce

  2. Simple: the PC killed the SUN by Anonymous Coward · · Score: 5, Insightful

    SUN started in the 1980s as a Unix workstation vendor. They were very successful because, for a Unix vendor they were pretty cheap. Unfortunately for SUN, the PC was cheaper and progressed much faster than anyone in the 80s or early 90s could have imagined, and surpassed the SUN workstations while remaining much cheaper. Although SUN still has a pretty good presence in High-End computing, the market there was never really that big (apart from the fluke during the dot-com boom).

    1. Re:Simple: the PC killed the SUN by perlchild · · Score: 3, Insightful

      Going back several years, there's a lot more Sun Workstations that were used as servers than anyone at Sun cares to admit. That market got absorbed by the i386 linux market, that's why they bought Cobalt, they were trying to recuperate some customers(but customers who wouldn't admit they every bought Suns...)

    2. Re:Simple: the PC killed the SUN by fanatic · · Score: 2, Insightful

      Many Network Management workstations were Sun boxes. People did in fact sit at them.

      Timeview, used to manage Timeplex's T1/T3 Multiplexers, comes to mind. And Cabletron had a product called Spectrum, used to manage their hubs, or whatever other stuff you were running, also ran on solaris on Sparc.

      --
      "that's not encryption - it's a new perl script that I'm working on..." - from some Matrix parody
  3. New numbers out soon by deanj · · Score: 5, Insightful

    The new numbers for the latest quarter are coming out soon, so we'll have more to go on then.

    I do find it a little distrubing that I'm even saying something like that.... The short term mentality for success is putting a lot of un-needed pressure on companies.

    Anyway, like a previous poster said, this is the quarterly, "Oh, Sun's gonna die soon" thread. Don't believe it.

    Look at SGI. They were going great during the early nineties and had their legs cut out from under 'em when the ATI/NVidia wars started and people realized they didn't need to buy those mondo-expensive graphics systems anymore.

    Yet, they're still alive. Barely, but they're still alive.

    It takes a lot to kill a company, and Sun's not going anywhere anytime soon. They have $7 BILLION in cash in the bank right now, have a strong R&D budget.

    They're not going anywhere. Either is McNealy.

    1. Re:New numbers out soon by Anonymous Coward · · Score: 2, Insightful

      It takes a lot to kill a company, and Sun's not going anywhere anytime soon. They have $7 BILLION in cash in the bank right now, have a strong R&D budget.

      They're not going anywhere. Either is McNealy.


      And project looking glass looks really awesome for those who haven't seen it, it's a 3D gui that sits on top of Solaris or Linux and adds a lot more functionality. I'm not sure how they will 3.Profit off of it, but it's pretty badass.

    2. Re:New numbers out soon by dshannon · · Score: 3, Insightful

      Take a look at their P&L's. Seven billion doesn't last that long with a company that size if you're not making money.

      You're clearly not an accountant then. Cashflow and profit (or in Sun's case, loss) are different things. In my opinion, Sun's problem lies in converting their wealth of vision into reality at the consulting level. Here in Australia they seem to be desperate for consulting revenue, but can't provide great consultants to back up the great vision that issues forth from Menlo Park's EBC. However, some of their disruptive moves - like the Java Enterprise System's licensing model - work extremely well, but it will take a while for the business cycle to demonstrate whether client uptake will deliver the $$$

    3. Re:New numbers out soon by drooling-dog · · Score: 2, Insightful
      It takes a lot to kill a company, and Sun's not going anywhere anytime soon. They have $7 BILLION in cash in the bank right now, have a strong R&D budget.

      If nothing else, their cash may make them an attractive acquisition target. That is how big companies die...

  4. No, you need experience. by Moderation+abuser · · Score: 4, Insightful

    First, you must have some experience of having brought another major corporation to it's knees in the past.

    On a serious note, why is it that CEOs are rewarded very handsomely for poor performance and failure when the rest of us get fired when we don't get the job done, or even are perceived as not being value for money?

    --
    Government of the people, by corporate executives, for corporate profits.
    1. Re:No, you need experience. by CodeArtisan · · Score: 2, Insightful

      That's easy. CEO and Director compensation is such a highly complex issue that it is usually decided by an external review body. And the composition of this review body ? A bunch of Directors and CEOs from other companies. Seems fair.

    2. Re:No, you need experience. by the_mad_poster · · Score: 5, Insightful

      I always figured that if you were at the top of the heap, and you were surrounded by friends, you could do pretty much anything you want.

      In theory, to get to the top, you should know what's best for the business, how to implement what's best for the business, and be trustworthy to do so. However, anymore, it seems like an ivy league degree and some friends in high places are what it takes to get to the top. People aren't made into leaders just because they have that little slip of paper. Sure, it helps cultivate people who already have the talent, but just forcing your way through school won't make you a leader if you didn't have the skills to begin with.

      OTOH, people like us are viewed as "resources". Therefore, we can be replaced, upgraded, downgraded, or simply pitched out like used up garbage. We have the skills, but not the connections. The people who have the connections frequently don't have the skills to evaluate OUR skills because they were hired, again, because of their little piece of paper rather than promoted because of what they proved they knew.

      It really is a scary deformation of the way things are supposed to be. I'm sure management has a different view of things, but that's how I see it, and, from talking to other people, I don't seem to be alone in having that view.

      --
      Alito: A vote for Alito is a punch in the eye to put that bitch back in her place!
    3. Re:No, you need experience. by Anonymous Coward · · Score: 2, Insightful

      Except the techniques never work. People see through it, and complain about how stupid and evil their management is and how they hate their jobs. So what's the point of the facade if it's ineffective?

    4. Re:No, you need experience. by Pathetic+Coward · · Score: 3, Insightful

      Not as easily replaceable?

      McDonalds fry cooks can't be replaced by workers in Bangalore.

    5. Re:No, you need experience. by yintercept · · Score: 2, Insightful
      Basically, you're right in that management views you as a resource that is somewhat replaceable.

      Unfortunately, one of the goals of management is to assure that its employees are replaceable. For the health of the organization, you do not want to create a dependency on any one person or group. The company has to assure that they will still be able to function if any network admin or programmer leaves. For that matter, I believe it wise to migrate employees through different positions in the company to reduce dependencies. Likewise it is wise to keep as close as possible to standard practices making it easier to find replacements.

      One of the main reasons that franchising is so successful is because the internal functioning of the franchise is so well defined that it all but eliminates the individual quirks of the employees.

      Personally, I hate how this methodology marginalizes humans. I like human quirks. But most people would prefer to eat a McDonalds or shop at a Walmart where the procedures are well defined and the service is consistent to one filled with imagination.

    6. Re:No, you need experience. by vsprintf · · Score: 2, Insightful

      I'm a software engineer who recieved my Masters in CS and am about to complete an MBA as well, so I've got some perspective from both sides.

      Turn back from the dark side before it's too late. (Only slightly kidding.)

  5. Re:Sun employees vs Microsoft employees by Daniel+Dvorkin · · Score: 4, Insightful

    Yes, you really do need a mix, and I think the tech world as a whole is starting to realize it. (I can't speak for whether Microsoft or Sun has done so, of course.) Experience and energy both count; you get the best results when you have both.

    --
    The correlation between ignorance of statistics and using "correlation is not causation" as an argument is close to 1.
  6. The PC put the knife in but Sun twisted it by Anonymous Coward · · Score: 5, Insightful

    The PC was just a wound, it is Sun itself which is killing Sun. More acuratly it is the Sun directors which are causing harm. Watching Sun is like watching a schizophrenic. Do they hate Linux or love Linux this week? Do they love Java or hate Jav this week? Will they dilute the Java brand name with some other half assed project only tangebly connected with Java or will they hype up some new super-cool Java feature? Will they hate Microsoft or be in bed with them this week? Will they, won't they? Yes, no?

    It would be unfair to say that Sun don't have any direction. They do; but it involves thousands of twists and u-turns and someone keeps changing the map.

  7. Re:How is SUN dieing? by iggymanz · · Score: 3, Insightful

    I too have worked in major Sun installations over the past 15 years, but the point is they are losing market share that does not seem to be coming back. The list of things a Sun box can do that a Linux box could not still exists, but it's getting shorter. Maybe Sun will do something to reverse the trend

  8. Unfortunately for Sun by xyote · · Score: 2, Insightful

    the entire tech economy is in a race for the bottom. All the companies are living off of their seed grain because they're waiting for someone else to make the first move. McNealy should be right because long term thinking should be the best strategy. But even 7 billion may not be enough to tough it out. Even Microsoft is getting worried and it has 30 billion or so.

    1. Re:Unfortunately for Sun by timeOday · · Score: 2, Insightful
      Even Microsoft is getting worried and it has 30 billion or so.
      Why should Microsoft be worried? Unlike Sun, Microsoft is still raking in profits, so their huge pile of cash is still growing rapidly every year.

      Linux is deflating Microsoft's server prospects, but not the desktop. The desktop UI improvements in Linux have been offset by the stability and performance improvements in Windows.

      As a longtime Linux user (including on my desktop at work) I hate to say it but linux has plateaued. It's about as good it can be without any vendor support. We agnoize over details like whether to use multiple windows for a file manager, because the major problems are insoluble - most of the programs people use don't work on Linux, and an lot of the hardware doesn't either.

  9. Hey! Make *me* CEO! by Anonymous Coward · · Score: 3, Insightful

    The first thing I'd do is jump into bed with Microsoft.

    Even though I prefer to work with Linux, when it comes to serious back end and database processing, Big UNIX Iron is still the way to go. Linux owns the front end as far as I'm concerned, and will probably be eating Sun's, HP's and IBM's lunch in the back end in a couple of years. Given IBM's investment in Linux, they obviously know that as well.

    Apparently even Microsoft can read the writing on the wall, because they're integrating SFU (Windows Services for UNIX) into Longhorn. But SFU is crap.

    Make me CEO of Sun and I will make my junior execs do whatever it took to get Microsoft to integrate Solaris into Windows 2008. In the meantime, I will be delivering an interim product: SSFW - Solaris Services for Windows. I will probably have to sell my junior execs' souls to Bill, but I'll have Windows source code to get the job done.

    Honestly, I don't understand the appeal of Windows. But it is undeniable... Lemmings.

    I envision millions of Windows servers reliably and securely running native UNIX/Linux software side-by-side with the Windows applications that have made choosing Microsoft so easy. I see my developers sitting in Redmond cubes and Microsoft developers sitting in my bay area cubes.

    With Solaris integrated into the Professional, Server, Enterprise and Data Center versions -- everything except Home Edition -- I won't charge much in the way of royalties. Single digit percentages of the MSRP will bring in vast revenues to Sun.

    In return for helping Microsoft shut out HP and IBM, Bill will be obliged to help create a Solaris management user interface look and feel that mimics Windows. The next generation of sys admins will feel just as at-home on Solaris as they do on Windows.

    Oh, and once a year Steve Ballmer has to come down to Mountain View and dance around screaming "DEVELOPERS, DEVELOPERS, DEVELOPERS!". After all, Steve gets it!

    s/ Dr. Strangelove or: How I Learned to Stop Worrying and Love Microsoft.

  10. Opportunistic by KernelHappy · · Score: 5, Insightful

    I was once told by someone in the top three executive tiers at Sun that they are an opportunistic company, meaning that they see a trend and jump on it. I didn't quite realize how true this was or more specifically how dangerous it was until it sank in. If you look back, they jumped on the band wagon catering to databases, then the jumped on webserver train, then they tried jumping on the low cost linux server trail, then they jumped in the Office Suite cubicle and finally grabbed onto the OSS bandwagon, each time spending more money for less or no profit. There has not been a concise vision or plan for this company for quite some time and they're paying for it now.

    Unfortunately for Sun, they're not innovators and there are no current trends directly in their area for them to latch on to. Unfortunatley in lean times you need to either a) innovate and create new markets or b) produce commodity items cheaper. Neither of these things are congruent to Scott's vision or Sun's current form.

    Even if Scott was to step down, what do you do with Sun? Java is not going to make it any money as a product, their in house developers are terrible and IBM has pretty much gobbled up large enterprise development market, Microsoft, agreement or not, is always looming in the corner looking to spank McNealy. If McNealy was smarter, he would have tried to be a visionary by latching onto biotech or something, developing other hardware that would leveraged his existing product base and created a reason to use his products over someone elses. But again, not innovators, regardless of how much they complain about Microsoft stiffling innovation.

    Ultimately, Sun isn't quite a ship headed towards an iceberg, nor is it headed toward land. It's just circling in the middle of no where waiting for a volcano to build an island in its path.

    Every ship needs to refuel at some point.

    --
    -- Button up, your ignorance is showing
    1. Re:Opportunistic by Decaff · · Score: 2, Insightful

      Unfortunately for Sun, they're not innovators and there are no current trends directly in their area for them to latch on to.

      Sun have always been innovators. They were the main drivers for Unix Workstations in the 1980s, they pioneered GUIs for Unix. They helped push 'open systems' in which different OS providers wrote to common APIs. They pioneered donating APIs to the community to assist with market growth (NFS is a good example). They were one of the first users of RISC. They helped make binary portability a practical reality with Java (it was not the first such system, but the first designed for the mass market). Sun is helping to establish new markets and technologies. Turn on any TV channel and you will soon hear an advert to download Java games and programs to your phone or PDA. This market is huge, and Sun gets paid for consultancy services by the companies that develop the phones. This year major car builders are working with Sun to enable the use of Java
      as a real-time embedded control system. Sun get paid for this work.

      Java is not going to make it any money as a product

      Java is making Sun millions, through licencing, and as a mechanism for enabling Sun's recent sigificant growth as a software consultancy company.

      Sun may have many flaws, but lack of innovation has never been one of them.

      It's just circling in the middle of no where

      Not at all. The company is changing, with a major and increasing part of its revenue and direction being nothing to do with hardware.

  11. SPARC couldn't compete by imnoteddy · · Score: 2, Insightful
    In many ways the SPARC is technically better than the x86. Unfourtunately for Sun they don't (and never could) have the sheer volume of silicon coming out of the fabs to compete with Intel. Intel can invest huge amounts of money in design and spread the cost over many more chips. Sun's SPARC strategy was doomed.

    HP recognized that they couldn't play the custom processor game and teamed up with Intel for what is now called Itanium, which has not turned out well for HP.

    It remains to be seen whether IBM's POWER series can survive. IBM, unlike Sun, can at least leverage their investment with other customers such as Apple and reportedly Microsoft's XBOX 2.

    --
    No electrons were harmed creating this post, though some may have been subjected to electrical and/or magnetic fields.
  12. Re:Sun employees vs Microsoft employees by drooling-dog · · Score: 3, Insightful
    Experience and energy both count; you get the best results when you have both.

    In some ways, energy slowly gets killed by experience, rather than being the result of age per se. In my 20s, technology was cool and I was thrilled with what I found myself increasingly able to do (and with what I was entrusted to do). That made 12 and 14 hour days zip by like nothing, and the occasional all-nighter seemed fun. Now, in my 40s, I can do just about everything more efficiently and with fewer false starts, but the "cool" aspect has diminished and motivation for extraordinary effort has to be found somewhere else...

  13. Re:How is SUN dieing? by mritunjai · · Score: 4, Insightful

    Instead of modding, I think I should reply to you sir!

    What kind of service exactly are you getting from ebay or newegg ???

    Yeah, its true that SUN's hardware is expensive... but when shit hits the fan and your server is down... and you're losing money 1000 transactions BY THE MINUTE, you really need someone to come down and save you!!

    This is enterprise grade hardware... not any DIY stuff!

    If you can manage a whole day replacing and restoring everything from backup, and waiting for your homemade RAID to replicate all data, by ALL means do that. Incidently there are a LOT of businesses that can NOT afford that.

    The only problem with SUN is that they've overengineered their products and right now, the market for such exotic stuff is limited... and SUN has been slow to respond to changes.

    If you want to blame their management for that, do it. But don't raise a finger at their products!!

    --
    - mritunjai
  14. I just go to ask, what does it DO by SmallFurryCreature · · Score: 3, Insightful
    What does looking glass DO. I seen the demo and am totally unimpressed. That CD catalog thing was just sad. Oh wow, I can see the pictures of the cd's I got in some kind of weird layout. Yeah that will show winamp. Music playing on the pc is background noise, just create a long playlist and play. Real audio fans would recoil in horror at the idea of listening to audio from a soundcard.

    As for browsing music there got to be a better interface then this. I would be far more impressed with a player that can browse by mood, instruments used (In the mood for some sax right now :P) etc etc. An interface that allows me to browse cd covers on my desktop is not needed. I got the cd's, I can browse them just fine in the physical world.

    The organising of windows too seemed just to be little tricks and gadgets, it been tried before and people just don't use it after the novelty wears off.

    There should be a better way to organize your desktop but I seen to many of these "fancy badass" things in my past to hold out much hope. The current desktop been around a long long time and while horrible if it gets occupied I don't see this helping any. Just look at the space taken up by just 5 windows "shaded".

    So exactly what functionaty does it give?

    --

    MMO Quests are like orgasms:

    You may solo them, I prefer them in a group.

  15. Blame Apple by Matthias+Wiesmann · · Score: 4, Insightful
    I think the reason why see those Sun is dying articles is because the 'Apple is dying' articles are starting to be really difficult to take seriously.

    Actually, the article is eerily similar to the 'Apple should have' articles. Basically, what was done wrong was to try to do new things, invest in research. Instead the company should have built wintel boxes like Dell and fired a maximum of people.

    How many companies have been successful in imitating Dell except Dell?

  16. Re:So what are we doing with Sun? by Anonymous Coward · · Score: 1, Insightful

    "I am frightened by the # of replies to your post that seemed 100% ignorant of the fact that same post was a joke."

    OK, here's the problem, and this is common enough on Slashdot that I'll take the time to reply to this.

    The post that everyone's flaming out on said something fairly outrageous, but said it in a way that it wasn't clear it was a joke. Heck, I was one of the ones who didn't get it, and posted a "what a moron, doesn't he know Sun keyboards work on PCs?" response.

    The reason why? Because the post (9725170 - Score:3 Funny at the moment) is really only funny if you knew it was in reply to -- essentially a parody of -- a *really* lame post (9725098). But the really lame post had already been modded down to -1 by the time most of us read this thread, so no one sees it any more.

    The moral? When in doubt, don't assume someone will see the post you're responding to, and QUOTE THE RELEVANT PART OF THE POST. Humor is fragile; humor out of context is just plain confusing.