March 3rd, 2009
Sun's Schwartz: I'm not worried about the future (or Sun's relevance)
Sun Microsystems Chief Jonathan Schwartz began a blog series on the state of the company, which he argues is more relevant than ever.
After watching the video and reading the transcript I’m left with that uneasy feeling you get when you see a CEO on CNBC saying everything is just fine. That’s not entirely fair, but that’s my gut reaction to this Schwartz post and what I’m now conditioned to think–after one too many “I’m not worried we’re fine” lines from Corporate America.
If Sun were stronger than ever would its CEO have to deliver the following statements?
Let me start by joining the chorus of those worried about the global economy. I am routinely talking to customers now partially owned by governments, whose share prices have declined 95% or more, whose balance sheets and basic business models are under extraordinary duress. Like every business, our health is a derivative of our customers’, and to that end, we’ve got our challenges - sure, innovation loves a crisis, but only after customers have stepped out from under their desks.
And.
Sun is privileged to have an exceptionally strong balance sheet, over $3 billion in cash, and a nearly two decade history of generating positive cash flow. We’ve also got a set of technologies and people that continue to play an ever more vital role in the economy. Sun’s products help companies grow and help them consolidate, and they help governments stimulate the economy, as well. From building bridges to automating health care, government stimulus will undoubtedly drive technology investment, and we’re well positioned to participate globally.
And.
I’m neither worried about the role information technology will play in the economy, nor am I worried about the relevance of Sun’s offerings. I’m not worried about the future, I’m focused on its arrival date.
Sounds to me like there is a little more than nothing to be worried about. In fact, Sun is a company that is too connected to the U.S. economy and is trying to transition from being a hardware-dominated outfit to one driven by open source software. The problem: The revenue gap from morphing Sun the mostly hardware company today into Sun the Red Hat of tomorrow is about $11.4 billion in annual revenue. Assumption: Sun’s hardware business disappears tomorrow and the company grows into a Red Hat business model (Sun’s fiscal year revenue of $13.26 billion minus Red Hat’s $628 million).
Simply put, Schwartz is likely to have a wrenching change ahead as Sun wrestles with its mature business and grows its new ones. It’s great that Schwartz isn’t worried, but I don’t buy it.
Schwartz says Sun’s goal is to recruit every developer on earth to use its software or services, deliver the most compelling commercial offerings and sell the connection between those two aforementioned items. Can Sun succeed? Perhaps, but it has a tough road ahead and may look better split up or tucked into a larger player–like IBM–in the future.
If interested, I encourage you to watch Schwartz’s video. Decide for yourself.
Also see: HP to distribute Sun’s Solaris on its Proliant servers
After charges, Sun’s loss turns to gain; beats estimates
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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