Sun sees future in computing service providers

CEO favors customers who are expanding networked services over "the pedestal server for a flower shop in a shopping mall."

SAN FRANCSICO--The way Sun Microsystems sees things, Moore's Law divides the computer technology market into two parts: those who will buy computers and those who will rent computing services from the first group.

Sun is aiming its products at the first market sector, Chief Executive Jonathan Schwartz said in a sales pitch here at the Oracle OpenWorld conference.

Moore's Law, the brainchild of Intel cofounder Gordon Moore, is the observation that the number of transistors on a silicon chip will double every two years. Informally, it also stands for steady improvements in storage and network capacity, and it is intimately connected to the steady decline of computing technology prices.

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Some customers enjoy steadily decreasing computer equipment costs as a result of Moore's Law. Schwartz argued, however, that as a computer maker, it's a better idea to sell to companies such as eBay, Verizon, Google, Oracle and Salesforce.com, which are spending increasing amounts on computers to build new networked services. Those customers aren't satisfied by the pace of Moore's Law as they expand services and subscriber bases, he said.

"We focus on customers for whom IT (information technology) is a competitive weapon...They're making incremental investments that are double, triple, quintuple what they were two or three years ago," Schwartz said. "We do not necessarily focus on customers for whom IT is just a cost center."

That means many computing customers today don't match Sun's interests. "We're not going to be focused on a pedestal server for a flower shop in a shopping mall," Schwartz noted. That type of business will eventually forego computers altogether in favor of buying an online service from the type of networked service provider to which Sun caters, he predicted.

Schwartz took over as Sun's CEO in April and has been reshuffling executives and overseeing a massive layoff. But he's trying to preserve one element of predecessor Scott McNealy's legacy: Sun's status as industry visionary.

That position gave Sun plump profit margins and strong sales during the Internet bubble, but was equally tough when the bubble popped. Sun has spent years trying restore revenue growth, consistent profitability and relevance.

Schwartz also embraced McNealy's bullish tone.

"One of the downsides of a bubble is the end. But one of the silver linings is that typically bubbles precede build-outs," Schwartz said. "The bubble pops, a lot of people lose a lot of money, companies fail, but what's left is a global build-out." For example, bubbles burst around railways and electrical utilities, but shortly after that happens, those became real businesses, he argued.

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