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Sun denies rumors of delayed systems

A top executive is throwing cold water on recent analyst reports that claim the company is struggling with computer problems regarding the move to its new UltraSparc III chip.

Sun Microsystems is throwing cold water on recent analyst reports that claim the company is struggling with computer problems regarding the move to its new UltraSparc III chip.

During an interview with CNET News.com on Tuesday, John Shoemaker, executive vice president of Sun's systems products group, took issue with concerns surrounding Sun's transition from the UltraSparc II chip to the UltraSparc III.

The Palo Alto, Calif.-based company began shipping a handful of lower-end server systems with the new chip this year.

After a series of reports, analysts issued a series of downgrades, sending shares of the company to a new low.

Among the most worrying was one report from Merrill Lynch analyst Thomas Kraemer, who said Sun is experiencing problems manufacturing the new chips. He also pointed out that the company may be facing weaker demand for its products and could release its high-end UltraSparc III StarCat server in December 2001--instead of in the first half of the year as earlier expected.

Shoemaker on Tuesday wholly refuted the analyst's claims.

"We've been battling a rumor a day for the last week or so," he said. "I am the guy who stood up on Sept. 27 and announced this stuff. I know what I said."

Sun doesn't deny, however, that larger problems exist industrywide that could affect demand for its server products.

Sun chief executive Scott McNealy warned Wednesday that broader economic problems will mean continued austerity measures despite a growing market share and "stunning" revenue growth.

Although the transition to UltraSparc III is going well, Shoemaker said that Sun isn't able to keep up with demand for SunBlade 100 workstations. Nevertheless, he said the company is shipping as many systems as it had originally planned.

"We're shipping in the hundreds" of units, he said, adding that Sun's manufacturing efforts would meet server demand by January.

However, the company is shipping SunBlades only to 35 large direct customers, meaning that resellers don't have any workstations for sale yet, he said.

Higher up on the product line, Sun plans to introduce midrange "Daktari" systems, higher-end "Serengeti" systems, and top-end "StarCat" systems within the next six months, Shoemaker said. That's the same schedule the company announced in September--and there haven't been delays since that announcement, he added.

"We have set the announcement date. We are within the window," he said. "When we announce, we'll be able to ship in volume," he added, referring to Hewlett-Packard's recent woes. The company unveiled its high-end Superdome system in September, but won't start shipping in volume until January.

However, Sun has delayed the systems before. The UltraSparc III itself was a year late, and as recently as May, Daktari and Serengeti systems were scheduled to debut in October 2000, according to sources familiar with Sun's plans.

And in late 1999, Sun had hoped to release the first UltraSparc III systems in May--instead of their actual debut in September.

Shoemaker acknowledged a 3 percent rebate Sun had been giving companies selling Sun systems this quarter. Rebates, which mean resellers get to pocket a bit more revenue from the sale of a Sun product, act as an incentive to boost Sun sales.

However, Shoemaker denied that the rebate indicates problems at Sun.

"We're not seeing any extraordinary build-up of inventory in the (sales) channel. Inventory has been fairly low," he said.

Sun is paying for the rebates out of funds dedicated to such promotional efforts, Shoemaker said. "This is not anything out of the ordinary."

Sun will move from current 750-MHz chips this quarter to 900-MHz models using copper circuitry in the first quarter of 2001. The company then will boost speeds every six months until Sun reaches 1.5-GHz chips.

"In the two- or three-year timeframe, we'll be able to get to (fivefold) performance over our current UltraSparc II-based platforms," he said.

A successful transition to the new chip is critical for Sun. The company is working to keep HP, IBM and others at bay so it can maintain its top Unix server ranking and lock in gains in the overall server market. The arrival of the Internet combined with an increase in computer use has boosted the total server market to $15.4 billion in the third quarter, according to market researcher IDC

But Sun's success has awakened competitors. IBM, HP, Compaq Computer, SGI and Unisys in the last year all have released new top-end Unix servers, while Microsoft and its ally, Intel, are working on making a stronger push into the high-end, profitable category.

Shoemaker also said Sun is nearing the end of an embarrassing cache memory problem that caused midrange and high-end servers to reboot unexpectedly.

"We're hopeful that over the next few months we'll be through this," Shoemaker said. "We have validated a fix. It has been tested around 1.2 million hours without a single failure...We have several hundred modules out. We are now ramping and prioritizing and shipping to customers who have problems."