FRAMINGHAM (10/03/2003) - Sun Microsystems Inc.'s announcement last week that it will post a larger-than-expected loss in its fiscal first quarter is the latest evidence that Sun is trying to exorcise demons.
With increasingly powerful Intel-powered boxes running Linux, which call into question the need for Solaris on Sparc, Sun has only managed to post three profitable quarters - slim at that - in the last eight.
But Sun is fighting back, touting new low-cost products and an interesting new software story.
Regarding the former, Mark Tolliver, executive vice president of marketing and strategy and chief strategy officer, says Sun already offers some Intel Corp.-based servers for less than Dell Inc., and much less than Hewlett-Packard Co. and IBM Corp. "And our one- and two-way entry-level Sparc servers are 65 percent cheaper than they were two years ago," he says.
But can Sun ramp up the low-cost business fast enough to offset declining demand for higher margin products? "We have to do it," Tolliver says.
To help round out the balance sheet, Sun also is looking to drive up sales of higher margin software. The company led the recent SunNetwork user conference with a software announcement, the Sun Java Enterprise System (formerly Project Orion).
As we reported, this is an infrastructure software suite that includes homegrown code and products acquired over the past five years. It includes identity management controls, Web and application servers, messaging, calendaring and portal tools, and clustering services for availability.
Delivering the tools as an integrated suite ensures the pieces work together. And Sun will update the suite on a fixed, quarterly basis and deliver a single installer for automated updating, which saves customers the hassle of keeping up with and keeping track of various versions and releases.
The kicker: The entire suite costs US$100 per employee, per year, which includes service, support and a certain amount of professional services. So no more complex negotiations, no huge upfront cost, no mixed billing cycles and no more auditing.
Tolliver, who used to run Sun's software business, says he thinks this changes the software game. With current software licensing practices, "once you write me that first $6 million check, I have an almost irresistible urge to seek the next one," he says.
The pricing scheme and delivery model are indeed compelling, but the question is whether the software itself is compelling enough to attract customers. As attractive as it looks, most companies already are committed to products in these categories.