Sun's gloomy side

The computer maker has usually fallen short of its potential in software and storage. Can new plans turn things around?

Editor's note: This is the last of a two-part series that looks at the turnaround strategy at Sun Microsystems. The first part was published Monday.

When you're trying to convince the business world you're still relevant, it helps to have a former employee now working in the corner office of arguably the hottest tech company in the world.

In a tightly packed press conference at Silicon Valley's Computer History Museum earlier this month, Sun Microsystems Chief Executive Scott McNealy took the stage with Google CEO Eric Schmidt. Back in Sun's glory days, when it introduced the Java software technology and was making a killing on computer servers, Schmidt was the computer maker's chief technology officer.

Now, as Sun attempts to regain its shine after four years of disappointment, it can't hurt to be associated with Google. And the ever quick-witted McNealy was quick to make a self-deprecating jab at the moment.


What's new:
Sun is in the midst of an effort to recover the prestige and financial health it lost when the dot-com bubble burst.

Bottom line:
In a two-part series, CNET takes a look at the new products and plans that could get Sun back on track, and explains why some other areas may not be so easy to fix.

Will a new plan to embrace rather than do battle with open-source alternatives in software and an aggressive acquisition in storage make things any better?

More stories on Sun

"It's a natural for me to be sitting here with an ex-Sun employee," McNealy quipped. "We have littered the industry with ex-Sun employees."

The focus of their partnership, interestingly, is software. Schmidt's Google endorsed Sun's software philosophy and pledged to help with several projects. Among them: Java, which lets the same program run on widely different computers; OpenOffice, the open-source software suite that competes with Microsoft's Office; OpenSolaris, the open-source version of Sun's operating system. Meanwhile, Google is paying Sun so its Toolbar software can piggyback on downloads of Sun's Java.

But as has so often been the case with Sun's software plans over the years, the partnership talk was long on vision and potential but short on specifics. Unless Sun and Google can provide better evidence, the deal "is more Sun trying to huddle under Google's current market halo than a definitive business agreement that will result in real dollars for either party," said Gabriel Consulting Group analyst Dan Olds.

Truth is, there's always been potential in Sun's software business. The same could be said of Sun's long-foundering data storage equipment unit. But for one reason or another--programmers bogged down by too many projects, poor execution, or cheaper alternatives--sales in both areas have routinely disappointed.

Will a new plan to embrace rather than do battle with open-source alternatives in software and an aggressive acquisition in storage make things any better? Sun President Jonathan Schwartz, who ran Sun's software efforts before taking the No. 2 slot at Sun in April 2004, certainly hopes so. "Everything that Sun produces will be open source and free," Schwartz said in a September speech, with Sun trying to make money by selling support to big businesses.

Two projects, the Solaris operating system and Java Enterprise System, dominate Sun's effort to expand into the software business. Sun hopes both will remake the industry; the JES server software through unusual pricing, and Solaris by building an alliance with open-source developers.

Related story
While they may agree with his strategy for turning the company around, investors still wonder if Scott McNealy is up to the task.

JES is a broad collection of server software for handling tasks such as managing the digital identities of computer users or running Java programs. Initially, Sun charged each customer $100 per year for each employee, no matter which JES packages were used. Sun tweaked the pricing in January, selling JES subsets for $50 per employee per year or the whole kit and caboodle for $140 per employee per year.

There is some good news. JES subscriptions jumped by 186,000 to 619,000 in the most recent quarter, and a major contract announced in July with General Motors boosted the tally to nearly 1 million. And the subset approach opens new doors, said RedMonk analyst Stephen O'Grady. "Breaking the JES package up into separate packages allows customers to buy just the functionality they require, at a lower cost," O'Grady said.

And this still has the potential to be a good business for Sun. Between 80 percent and 90 percent of customers renew their JES support subscriptions, Loiacono said.

Sun doesn't disclose JES revenue, but 1 million subscriptions at $50 apiece means $12.5 million per quarter--tiny when compared with

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