Analysis: Sun Microsystems is full of great-sounding ideas and technology.
So far, it hasn’t worked. Revenue is up, but Sun’s losses are mounting.
What’s the new CEO, Jonathan Schwartz, to do?
Here’s a starter list of eight suggestions courtesy of internetnews.com and analysts that follow Sun closely:
1) Find its own iPod. Several years ago, Apple was in a similar situation as Sun. No real direction, no raison d’être. But it wasn’t a line of new Macs that revitalized Apple, it was the iPod. Apple entered a market that had seen numerous high-profile failures.
Remember the Creative Labs Rio? But iPod succeeded where so many had failed, as only Apple could do it, revitalizing both the market for MP3 players and Apple. Sun needs to show it is looking forward, not relying on UltraSPARC/Solaris to get it out of this mess.
2) Pick a rock-star replacement. Schwartz’s promotion has left a temporary gap in the president/COO position. Sun needs to bring in someone like Michael Capellas or Mark Hurd who will inspire confidence and lead things internally while Schwartz and McNealy make nice with the customers.
“Schwartz does not have the turnaround experience. It would be wise to bring in someone with turnaround experience, to bring to the table a set of skills they don’t have right now,” said Rob Enderle, principle analyst with The Enderle Group.
3) Rebuild relations with the employees. Mark Hurd faced the same problem when he took the reigns of Hewlett-Packard after former CEO Carly Fiorina had alienated so many of the staff there. Hurd did one round of layoffs and promised no more.
Sun has had several rounds of layoffs, and that kills morale.
Schwartz needs to make whatever difficult cuts need to be made now, and then make the same promise as Hurd, said Enderle. “He needs to get employees back on his side and focused on the future of the company and not on the future of their jobs.”
4) Convince the market, not just himself and the employees, that Sun is still a viable, competitive company with something unique to deliver to customers. Sun’s public image has deteriorated in part because it missed the boat so badly on the rise of x86 and Linux. Cobalt servers, anyone? Now it’s playing catch-up.
“The fact they missed the boat so badly in x86 and Linux created the sense, either rightly or wrongly, that the company was living in its own dream world and missed what was happening in the world of IT,” said Charles King, principal analyst with Pund-IT Research, in Hayward, Calif.
5) Become more price competitive. Schwartz said on Monday’s conference call discussing his coronation that Sun would continue to compete on intellectual property. The problem is, he is trying to sell $50,000 servers against Intel hardware – a decent server can be had for under $1,000 – loaded with free software.
Sun’s AMD Opteron-based Galaxy servers have been selling well and are a good move that bodes well for the future. Expensive hardware just doesn’t fly any more. Premium hardware is a shrinking business, no matter what kind of performance you promise. Just ask SGI.
6) Open source Java already and embrace the GPL. Java is becoming as fat and bloated as C++. Programmers should have the option of ripping out what they don’t need. If common sense doesn’t prevail, perhaps reality will. That reality is going to be Ruby/Ruby on Rails. RoR is gaining momentum at a tremendous rate with programmers. If a big vendor gets behind Ruby (IBM? BEA?), Sun could be in big trouble.
7) STFU. In an industry full of loud mouths, Schwartz and McNealy are two of the loudest, and they have managed to bad mouth practically everyone and everything that has come near them, from IBM to the GNU General Public License. Sun has made a career out of being anti-everything, but never pro-something, other than itself.
“By taking a consistently negative attitude toward the competition, a vendor becomes increasingly insular. That’s not good for business,” said King.
David Needle, West Coast Bureau Chief for internetnews.com, contributed to this article