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McNealy: Sun safe from SCO damage

CEO Scott McNealy says he's thrilled that users of Sun's Unix-based operating system are sheltered from SCO's legal action against IBM. Plus, he predicts a huge consolidation.

SCO Group's ongoing legal action against IBM and end users of Linux has quietly left one company out of the dog fight: Sun Microsystems.

In the legal battle, SCO is claiming that the Linux operating system IBM sells and that many other companies use runs infringes on intellectual property rights it holds to some Unix code.

Sun has started to embrace Linux, though on a much smaller scale than have competitors Dell, Hewlett-Packard and IBM. However, it continues to back its Solaris version of Unix.

Responding to a question from this week, Sun CEO Scott McNealy said: "I don't want to speculate (on the outcome of the lawsuit), but I'm thrilled to death SCO can't revoke our Unix license.

"We can indemnify our users, and if anybody's nervous about (IBM Unix flavor) AIX or Linux, we've got Solaris on x86 (32-bit processors) and Solaris in the datacenter. We run like the wind. We're open. There are no downsides."

Earlier this week, analysts spoke about whether users should hold off on developing their Linux strategies or stick with them, with little to fear.

On his trip to the United Kingdom this week, McNealy mainly preached a vertically integrated approach to computing, with Java at its center. He said this makes life simpler for customers.

McNealy believes that its approach will give Sun an edge. The server maker will need that advantage, as it tries to haul itself back up to its former position of glory.

Last week, the Menlo Park, Calif.-based company reported a worse-than-expected fourth-quarter income of $12 million on revenue of $2.98 billion, while competitors such as Dell and IBM remain strong.

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McNealy pointed out that Sun has posted 35 straight quarters of positive cash flow and has several billion dollars in the bank--but, as many other technology and service providers are experiencing, write-downs have meant record losses in line with Generally Accepted Accounting Principles (GAAP) reporting code, which U.S. corporations follow when they submit their financial reports.

Although Sun's revenue has also fallen from the dot-com boom days when its server sales were brisk, McNealy contends that there will still be profits to make, as the market consolidates.

"The question is: What is happening to the total IT budget?" he said. "I think it's going to shrink. We're down to three--IBM, Microsoft and Sun. The rest is collateral damage."'s Tony Hallett reported from London.