Server platforms Toolkit

Sun seeks to restore its sheen

Mike Ricciuti CNET News.com

Published: 08 Oct 2003 11:20 BST

These days, any news about Sun Microsystems seems decidedly glum.

Last week, the company reported a $1bn (£0.6bn) tax charge and warned of a significant quarterly loss, an announcement that financial analysts seized on as evidence that Sun's core server hardware business is losing out to cut-rate competition from Intel. Then, Merrill Lynch analyst Steven Milunovich issued an open letter on Thursday to Sun chief executive Scott McNealy, urging him to cut expenses through additional layoffs to avoid becoming "irrelevant to most users, and eventually acquired."

But even in the face of this barrage, industry veterans say the company is hardly on the verge of collapse.

In essence, technology analysts and customers say, there are two Suns: One is the financially stressed company that depended excessively on Unix servers, became bloated on dot-com sales, hired more workers than it needed and, admittedly, signed too many expensive real-estate leases. The other is the technological innovator -- known for spawning networked computing and Java -- that is driving the latest industry advances in hardware architectures and on-demand systems.

To only focus on the first version -- the Sun of old -- is to miss the big picture, said Tony Scott, chief technology officer at General Motors, one of Sun's largest and most influential customers. "All of that infrastructure that Sun pioneered is valuable, important and will not go away. There is a lot more ground to be ploughed where Sun has a lot of strengths," he said.

While acknowledging the company's immediate problems, he and others say Sun has laid out a viable technology plan for the future. Sun announced parts of that strategy at its SunNetwork conference last month.

Some of the company's most valuable assets, including its intellectual capital and new products in development, such as its N1 systems management initiative, will help Sun tackle new markets. Sun also has launched the Java Enterprise System, a no-nonsense, $100 per user software bundle that's already winning praise and customers, and its highly respected research and development unit is making progress on more efficient and powerful hardware.

Above all, while Sun has lost some sales in recent months, the company's most important and influential customers are staying put, according to analysts and sources close to the company. Regardless of what critics say, the company still has about $5.7bn in cash and marketable securities.