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4Ps
Into the ‘Big Blue’ sea...
Sun Microsystems is a pale shadow of its former ‘dotcom’ self. IBM’s proposed takeover would be the last nail in its coffin, says Ratan lal Bhagat of 4Ps B&M
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 Dark and dense clouds are engulfing it from all directions. And the Sun of Silicon Valley does not appear to have very strong chances of making it beyond this rough weather. Moreover, a ‘big blue’ monster is just waiting to devour it.
“The economic downturn continues to weigh on our customers, especially those that contribute to our traditional high-end businesses,” said Jonathan Schwartz, CEO of Sun Microsystems while declaring Sun’s results for the quarter ending March 2009. The player has registered heart shattering successive losses of $1.677 billion and $209 million for the last two quarters. One of the primary reasons is that around 40% of Sun’s total sales are generated from companies in the financial services and telecom domain. The ongoing financial crisis has seriously crippled the funds of its present and prospective clients, thus forcing them to pull back on technology spends.
However, that is not the only reason for the dismal performance of Sun Microsystems. The Santa Clara, California-based software giant has been beset by problems galore, ranging from slowing demand leading to falling revenues, product slip-ups, growing competition and a stock that has lost three-quarters of its value in the last fiscal year alone.
It all began when this dotcom darling was unable to make its much touted hardware to software shift. Moreover, competitors took the advantage of Intel chips and Windows software to push cheaper machines into the market, a strategy ex-CEO Scott McNealy rigidly refused to deploy.
“Strategically, we continue to focus on two core areas - creating the world’s largest, and fastest growing developer communities – for whom we build the products, services and technologies on which they’ll build their products and services. And secondly, we deliver compelling commercial offers in the form of systems, software and services to those deploying applications – across a diversity of industries – through commercial subscription, services and optimised system products,” explains KP Unnikrishnan, Regional marketing director- Emerging markets(LATAM, EMMA, Greater China & India), Sun Microsystems. Surely, Sun has relentlessly poured billions of dollars into new products for a decade to overcome the dot-com fallout, but with its high-cost business model, many products are taking way too long to hit the market and revive its fortunes.
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 Another strategy of Sun that has got its bottom lines bleeding is the developing of free, “open-source” software and the generous giving away of its prized software products under spur sale for peanuts to boost the adoption of its software by the target audience. “In general, Sun has been stuck in a transition between a hardware-centric and a software-centric model and getting stuck in the middle is suicide in any market; in this market, it’s almost instant suicide,” supports Rob Enderle, President and Principal analyst, Enderle Group. Moreover, the factor that has added to the growing predicaments of Sun is that those products, where it bet its money – open-source software, new server and storage systems and new processors; have failed to generate the required responses.
That explains the debacle in the server space. Sun, the famed ‘dot in dotcom’, and popular for its servers in those days, owns only 10.1% of the worldwide server market, while HP holds 30% and IBM leads the pack with nearly 32% (IDC). With the continually shrinking market of Unix operating system dominated by Sun, HP and IBM are clearly taking the honours in the server space.
And now its currently dire financial state has got traditional foe IBM discussing a prospective purchase of Sun’s properties for an approximate $6.5 billion. “I don’t think this will be a company purchase, more of an asset purchase, so conflicting offerings will likely get killed rather quickly. I don’t expect many of the Sun hardware products to survive,” predicts Enderle. Moreover, IBM could use a number of Sun properties to enhance their cloud platform, move back to market leadership in server share, and also ensure that another SCO like event doesn’t occur. “IBM is not and should not attempt to reverse any existing Sun weaknesses. IBM will most likely take the best of the cloud technology, Java and the exceptional talent; replace existing management and fold technical, technology, service and product teams into the IBM environment as quickly as possible. Except among die-hard fantasists, any emotional attachment to Sun has long since been ‘burned’ out,” avers Richard L. Ptak, Co-founder and Managing Partner, Ptak, Noel & Associates LLC. So many jobs at Sun could be rescued. But it certainly seems to be the end of the road now for the Sun of Silicon Valley.
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4Ps
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