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."

Comments

Classical big-company problem

[Bruce Perens]

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

Re:Classical big-company problem

[scoove]

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*

Re:Classical big-company problem

[Bruce Perens]

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

Simple: the PC killed the SUN

[Anonymous Coward]

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).

New numbers out soon

[deanj]

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.

No, you need experience.

[Moderation abuser]

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?

Re:No, you need experience.

[the_mad_poster]

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.

Re:Sun employees vs Microsoft employees

[Daniel Dvorkin]

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 PC put the knife in but Sun twisted it

[Anonymous Coward]

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.

Opportunistic

[KernelHappy]

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.

Re:How is SUN dieing?

[mritunjai]

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!!

Blame Apple

[Matthias Wiesmann]

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?