Former exec challenges Sun over profit margins

SAN FRANCISCO--Sun Microsystems Chief Technology Officer Greg Papadopoulos faced familiar skepticism Wednesday about the profit margins of Sun's business--but this time it was from Bill Coleman, a former Sun executive and business partner who now is chief executive and co-founder of Cassatt.

Coleman oversaw Sun's move from its SunOS operating system to its current Solaris product in the early 1990s, then founded BEA Systems, which sells software to let servers run Java programs. Now he's in charge of Cassatt, which sells software designed to automatically move programs among a group of servers so data centers work smoothly and efficiently.

Greg Papadopoulos

But in a question at the Vortex conference here, Coleman challenged Sun's business. Customers like Solaris, but the company has become only a tactical supplier of servers instead of a strategic supplier, Coleman said. And profit margins are dropping in the server realm as they have in the PC realm.

"I'm concerned you're going to go the way of SGI," Coleman said of Sun, referring to Silicon Graphics, which specialized in high-end machines but whose business has steadily declined in recent years. How will Sun survive in a business with 20 percent profit margins--by increasing sales volumes dramatically or cutting distribution and development expenses?

Papadopoulos strongly objected to Coleman's assumption.

"I disagree with the leap that it's a 20 percent business. It's not that," Papadopoulos said. There are plenty of things customers spend money on besides just basic hardware and software.

"You started a company that is going after complexity. There are a lot of rewards to getting over solving that problem," Papadopoulos responded to Coleman. "At the basic level we should be collectivly embarrassed about how bad it is in computing--from the complexity of the operational side to how much power we waste. There is $2.5 trillion spent in information communication technology, and only a few hundred billion is in hardware and software space. There's a tremendous prize to be awarded."

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