Sun forging ahead after criticism

Sun Microsystems Inc. remains undaunted by a recent analyst report urging major changes at the company, and will forge ahead with plans to win new business through its server and desktop software systems.

In a press briefing at Sun's San Francisco offices on Thursday afternoon, Jonathan Schwartz, executive vice president of Sun Software, outlined the company's efforts to grow. These efforts include leveraging its Solaris OS on the Intel Corp., Advanced Micro Devices (AMD) Inc. Opteron, and Sparc International Inc. platforms as well as boosting its Java Desktop System desktop software package. On the server side, the company will tout its Java Enterprise System software. The company even plans to launch migration programs to try to lure customers from rival companies such as Hewlett-Packard Co. (HP) and IBM Corp.

"The undercarriage of this whole [effort] is where we go with Solaris," Schwartz said. A key effort is the planned release of Solaris for the 64-bit AMD Opteron platform, slated to go into a preliminary release in early 2004. Sun on Thursday announced it has more than 300,000 registered licensees for the Solaris 9 operating system on the Intel x86 platform.

While not fully rejecting everything noted in an analyst report Sun from Merrill Lynch & Co. Inc.'s Steven Milunovich last week, Schwartz said Wall Street has questioned Sun's strategies before. He cited Sun's decision to not adopt Windows NT in 1993; but Sun created a US$120 billion installed base through this decision, Schwartz said

In his report Milunovich said the company, which recently reported a $1.039 billion quarterly loss, faced a crisis and should consider options such as spinning off Java, de-emphasizing Sparc, and having Chief Executive Officer Scott McNealy retreat from his brash image. Milunovich referred to Schwartz as "brilliant" but "cut from the same cloth" as McNealy.

"I think Mr. Milunovich is a fan of theatrics," Schwartz said.

"I don't think Steve understands the industry very well, but I think there is truth in saying we have to show revenue and earnings growth," Schwartz said. He agrees with Milunovich's contention that Sun needs to productize Java, he added. That is being done with the Java Enterprise System, priced at $100 per employee, and the Java Desktop System, costing $50 per desktop. Both were officially launched last month.

Formerly known as Project Orion, Java Enterprise System features a directory, identity server, Web application server, portal services, e-mail, calendaring, instant messaging, clustering, and a grid engine. Java Desktop System, which had been called Mad Hatter, features a version of Linux, the Gnome desktop environment, Mozilla Web browser, Sun's StarOffice productivity suite, and several other open source products.

Milunovich said Sun should spin off Java, but Schwartz called this a "ridiculous concept."

"What exactly would you spin off? The branding team?" he asked.

The way that Sun will grow in a depressed economy is by taking share from HP and IBM, through 64-bit customer bases and by continuing to focus on quality, scale, and security, Schwartz said. He questioned HP's reliance, in particular, on the 64-bit Intel Itanium chip platform, saying it has not met volume expectations.

Sun's upcoming Solaris 10 release presents opportunities because its zones feature mimics the logical partitions function in the mainframe, enabling individual systems to be run in separate partitions in the operating system. Due in Solaris in an early- access release in the beginning of 2004, zones eliminates the concept of a single, all-powerful "root" in the operating system.

Schwartz also said the following:

-- Sun is paying salespeople two to five times more commission for selling software than hardware. "It's intended to engage customers in the architectural decisions in the businesses they're building," he said.

-- Java-enabled handsets are a growth opportunity for Sun. "We will ship more Java-enabled handsets that create more market opportunity for Sun than Microsoft and the PC industry will ship PCs," Schwartz said.

-- Internet-based fraud may displace viruses in the news in a year, because there is no cap to the amount of money that can be accessed online.

-- Interest in Sun's desktop efforts has been stronger in Europe than in North America. "For [Europeans], finding an alternative to Microsoft is a matter of national pride," Schwartz said.

-- Dell Inc. will come under increasing pressure from the component makers whose products Dell resells. "What if Intel decides to sell PCs?" Schwartz said hypothetically.

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