Posted on 07/06/2006 8:21:34 AM PDT by ShadowAce
Sun Microsystems is in deep trouble.
So say a number of analysts, most recently Brian Richardson from Meta Group who says the company has got it all wrong, with its hardware seen as proprietary and expensive.
Richardson said that it was hard to see any upside for Sun -- and he's not alone. Merrill Lynch analyst Steve Milunovich wrote last month to CEO Scott McNealy and the board: "The company has gone from being pure in vision and predictable in financial performance to an underachieving, bloated, unfocused reflection of its former self."
Sun has lost money consistently ever since the end of the boom -- when it boasted it was the dot in dot-com -- and is about to post another set of quarterly and annual results. It declined to comment on what those results might contain.
However, revenues have declined year-on-year from US$18.25 billion in 2001 to just over US$11 billion in 2005. It lost US$11 million in 2005.
The company has also shed thousands of jobs in recent years. In May, it announced it would slice a massive 13 percent -- some 5,000 people -- off its employment roster; last September it cut over 1,000 posts, which itself followed cuts of 11 percent in 2002, and 10 percent the year before.
It's lost people at the top-end of the company too, most notably last month when company co-founder Bill Joy quit, and when co-founder and chief Scott McNealy announced in May that he too was leaving.
Sun used to have a US$7 billion cash pile but this year's accounts will show a sizeable dent as a result of the US$4.1 billion acquisition of StorageTek which it completed last September.
While you can't attribute such decline to one single factor -- execution in particular being tough to pin down -- it's notable that HP and IBM have been eating Sun's lunch at the top end of the Unix market, while cheaper Linux boxes have been making serious in-roads into its systems business lower down.
In the meantime, analysts have suggested moves that Sun could make to stem the rot. They include the urgings in 2004 of Merrill Lynch to buy either Novell or Red Hat in order to get into the Linux market -- a suggestion it's yet to take up.
This is hardly surprising given that Linux would offer Sun very little differentiation, and Sun trades on the perception that its products are a cut above the common herd.
On the plus side, Sun does have revenues from Java to buoy it up -- a revenue stream likely to grow as more mobile phones incorporate it -- plus the promise of new developments on the SPARC processor front which appears to remain its priority.
It has also open sourced Solaris and parts of UltraSPARC in a move that's been described as jumping on a bandwagon, or attempting to gain free R&D.
However, the market is consolidating on the x86 architecture, making Sun look even more like a niche player. Even Intel with massive marketing dollars has failed to capture the mass imaginations of Unix systems buyers with Itanium.
And the trend is likely to accelerate as the one-box-one-application approach becomes less important with the advent of robust virtualization technology.
Well Scott, is now the time to short MSFT?
As prominent as Java is becoming, Sun will have to continue in some form to support the huge code base that exists out in the real world. I just hope they don't dissolve before I get my certification!
It's basically just another computer programming language. It's big advantage is that it can run on multiple platforms, so the programmer just has to write the code once, and it can run on Windows, SPARC, Linux, and Apple, for example.
Sun can die, but Java can't. Don't worry about that.
It lost US$11 million in 2005.
It's hard to see how they could be in any near term trouble with numbers like these. With several billion in the bank, they post annual loses like last years for several hundred years.
Besides there's always Ruby on Rails which might leave Java in the dust anyway.
The easy days of competing mainly against IBM are over, now they compete with MS, HP, IBM, RedHat, and Novell (And down the line maybe Apple) All of whom are serious players in the server market. I really hope they turn it around...
That's a shame - when I was in college in the early '90s, Sun was the company to work for if you were doing a CS degree. Employees used to post about how exciting it was to work there.
If their losses are 0.1% of revenue, they should be able to do something to get in the black.
I agree with you, I'm just making the point that they could go quite a while before really being in "distress".
Sun IS Java. They're the power behind J2EE, the JDK, the whole JRE. If they go, who maintains that stuff, not to mention enhancing it for the future?
There's been talk about Open-Sourcing Java by Sun.
What a ridiculous article, Sun may have lost some revenue to the foreign copy of Unix called Linux, but they're not about to go under. Their revenue is still over $10 billion (with a "B") per year. Add all the revenue up from every Linux company on Earth and it's not even $1 billion, nor will it be anytime soon. To put it in perspective, the largest Linux company by far Red Hat is only bringing in about $200 million a year, making Sun 50 times bigger in revenue, and much more diversified. Not to mention Sun has more cash on hand than Red Hat's entire market cap value! That means they could buy the whole company today, by simply writing a check. And the way RH shares are tumbling in value right now, that's not going to change anytime soon.
Lets hope not, still it seems as though you're putting your head in the sand any company with nearly a negative 8% ROE is in trouble. They can have all the revenue they want but in the end if it cost more than a buck to get a dollar in the door there are serious problems..
Add all the revenue up from every Linux company on Earth and it's not even $1 billion
IBM alone sells more than 2 Billion in Linux Servers every year! and thats not even counting their Linux service and support side of the table..
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