November 11th, 2008
Is Sun open source storage play too late?
Sun has laid the hammer down in enterprise storage, with an “open source” offering that really does pass the savings on to the customer, as they must be passed.
Enterprise storage costs more than what you have in your home. My son is a gamer who has 850 Gigabytes of storage. The low end of the new Sun line is 2 terabytes for about $11,000. I’m certain the Sun price is worth it.
As Larry Dignan notes, Sun hopes open source developers will rally round the flag, boosting storage sales from $25 million to a hefty share of its $3 billion total revenue base.
But as ZDNet also noted yesterday, it may be too late. Sun had to take enormous writedowns in the last quarter, posting an eye-popping $1.67 billion loss.
What really makes a downturn like the present one brutal is its ruthlessness. If companies fear doing business with banks that are on the brink (despite insured deposits) how you think they like dealing with vendors suffering the same perception?
Sun shares are now down to nearly $4 each. Sounds good, but the company did a 4-1 reverse stock split just a year ago. For those scoring at home it has lost nearly 80% of its equity value since going open source.
Big enterprises, the company’s traditional base, have to compare the low prices and open source software here to the risks Sun will go belly-up or be bought by someone with a proprietary mindset.
At times like this, any risk is often seen as too much risk.
Compare Sun’s present market cap of $3 billion to IBM’s of $130 billion. IBM could now have Sun for lunch while still leaving room for dessert.
At times of high uncertainty crazy ideas start to sound not so crazy. Sun has Silicon Valley facilities IBM could use to enhance its standing with customers there. Their strategies are rapidly becoming compatible.
Stranger things will happen.
Dana Blankenhorn has been a business journalist for 30 years, a tech freelancer since 1983. You can follow Dana on Twitter. See his full profile and disclosure of his industry affiliations.
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