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Sun in Sync With Web 2.0

Reporter's Notebook NEW YORK -- Pop quiz. Was it the open sourcing of Solaris, the creation of multi-core, multi-thread computer servers, or Scott McNealy's departure last year that contributed to Sun's gradual climb out of the abyss?

Answer? All of the above, plus the arrival of a little phenomenon called Web 2.0.

Let's quickly recap.

Sarcastic, wink-wink jabs at IBM  or other competitors by McNealy aside, Sun  is a company that had been strictly business. But then a lot of the business left in 2001, with the dot-comers who bought so many Sun servers fleeing for exit strategies and dumping contracts.

Sun 's sales plummeted. People lost their jobs. Analysts called for Sun to change its ways and cut expenses. IBM and the rest of the rival rabble rejoiced and smirked at Sun's hard, fast fall.

Brian Wilson, distinguished director and CTO of Strategic Office at Sun, said at a media and analyst event here Wednesday that one of the major factors that contributed to Sun's struggles was the refusal to unglue Solaris from the SPARC processor.

"We tried to tie Solaris to the SPARC processor at a time when SPARC was no longer the fastest chip," Wilson said. "We tried to protect our market by saying 'You want Solaris, you buy our slow SPARC chip.' What did the world tell us? 'Forget it.'"

With all due respect to McNealy (I'll insert my own wink-wink here), Wilson credited Schwartz with talking to customers and turning around and doing the opposite: untying SPARC from Solaris; opening up the operating system; and making servers capable of parallel processing.

The result? Fifteen percent growth in the server market last year. Twenty-four percent growth in the last quarter. Stay tuned next week for the new results; Goldman Sachs is projecting Sun to come in well above the 4 percent operating margin for the fiscal year.

Isn't it funny how a few big changes and a few years can make a world of difference?

While Sun may have untied Solaris from SPARC, the systems vendor is on the rise because the company is tying itself so closely to this evolving Web 2.0 world of blogs, wikis and mashups.

The company is looking to sell servers and software infrastructure to the newfangled applications makers who butter their bread by delivering applications over the Internet. You know the type: , Oracle's  on-demand assets, and a slew of other newcomers.

"If we only focus on serving our traditional customer, we are on the path to going out of business," Wilson said. "We need to capture the application vendors, not just to port, but to introduce the software-as-a-service model with Sun infrastructure."

Wilson outlined an interesting paradigm shift in its customer base. He noted that while traditional customers -- the WalMarts and GEs of the world -- have already purchased the infrastructure they need, they continue to be indirect customers of Sun.

Upstarts such as purchase Sun servers to power their Web-based applications. then sells these applications to the WalMarts of the world, piping them over the Internet. hosts the software in its server farms, powered by Sun systems. Sun may not make money from this transaction after buys Sun's servers. But, Wilson argued, Sun gets greater penetration in the market, paving the way for additional opportunities down the road.

How's that for market symbiosis? Great work if you can get it. Wilson said Sun is getting it.

For example, Wilson said Callidus Software delivers sales compensation and sales incentive software over the Web thanks to Sun's gear.

Importantly, Sun understands what this new customer wants because it, too, is involved in Web 2.0. At Schwartz' behest, company employees post blogs and conduct podcasts. This is Sun's drive to increase its transparency.

Hal Stern, senior vice president of engineering at Sun, said two years ago he blogged about meeting and striking up a conversation about hockey with supermodel Veronica Varakova, whose husband was NHL player Petr Nedved.

"That blog entry gets more traffic by people who I guarantee are not looking for Sun Microsystems but are looking for something on Petr Nedved or her," Stern said, drawing laughs. "You can't buy advertising like that. It's better than an ad in Sports Illustrated in terms of the number of people it drives to see what we're doing."

Transparency is great. As an East Coaster, I like knowing what's going on behind the scenes in Palo Alto, Calif. I appreciate that Sun is finding traction in this SaaS world.

I also have some advice for the company: Stop apologizing or explaining what happened in the dot-com era. The dot-com era is dead. Web 2.0 is where's it at now and, with apologies to IBM's wiki and mashup technologies, you seem to be hewing much closer to this phenomenon than the other systems vendors.

Time to look forward and make the opportunities you and Schwartz outlined come to fruition. Execution will be your redemption.

Clint Boulton is managing editor of