Monday, November 21, 2005

The Sun strategy in a nutshell

Here's my super-simplified four point Sun hardware strategy analysis:

  1. Get Solaris (and OpenSolaris) adopted by loads of developers and businesses
  2. Make computers that run Solaris faster than anyone else
  3. Get those same developers and businesses to go buy the fast servers
  4. Deliver next-generation storage solutions, to complement the fast servers

Here's my super-simplified four point Sun service strategy analysis:

  1. Make the Sun Grid available to all
  2. Leverage Tarantella to offer hosted desktops
  3. Sell more Sun Ray "thin clients"
  4. Sell more JES subscriptions, with See Beyond web services technology

Sunday, November 20, 2005

Where we're going

Since Jon Schwartz became President and COO of Sun, they've gained a clear vision, strategy and direction. The upside is that they know where they are going - the downside is the long slow wait to get there. Jonathan appears to have a keen grasp of economics and industrial history - and these attributes bode well for Sun's future. He clearly believes that computing will become a utility resource, like electricity and water in our offices and homes. He also realises as the price of software trends to zero, the value (profit) will come from services and hardware.

But here's my first problem. In February 2005, Jon proudly switched on the Sun Grid but I still can't use it. Now that's poor execution. Similarly, in a Q1 earnings call, analysts said customers could not get hold of new "Galaxy" servers. It will probably be the same with "Niagara" servers in Q2.

My second issue with Sun is usability. Although Jonathan is pushing the value of simplicity through the organization, much of Sun's wares and web sites are HARD TO USE. Let me give you an example - try downloading Sun Studio 11 for Linux. You'll have to jump through a few hoops. Even if you just want a faster C++ compiler, you'll probably need to install Java, NetBeans, etc. Why the unnecessary complexity? If Google can give anything to Sun might I suggest interface design would be a good starting point?

How we got where we are

Let's start out with the Big Picture. Around the year 2000, something big happened. Just as the internet bubble was bursting, Google showed the world that you could run your business on a number of standard PC computers connected to the internet. Open Source projects like Linux, Apache, Sendmail and MySQL showed that you could get hold of high quality software for free. This was bad news for most people who sold big computers and expensive software. It was especially bad news for people who sold web servers. Sun collapsed from a peak of over $60 a share to today's $4 level.

Most companies were quick to adapt to this disruption, but Sun decided to "tough out" the storm. It didn't work. Sun gradually down-sized, but too slowly to "get underneath" its large cost overhang. Gradually Sun reduced its head count to 30,000 and this year recovered to break-even while maintaining a 2 billion R&D spend. Quite impressive, but profit is what counts right?

Has Sun reached a turning point? Can it deliver profit to shareholders? Well, the signs are good. Stay tuned for a detailed analysis of new Sun technologies and services, such as OpenSolaris, ZFS, Niagara (AKA T1 chip), Chip MultiThreading (CMT), grid/utility services, and most importantly storage.

Welcome to Sun Visor!

I'm an investor and I choose to invest in Sun Microsystems (NASDAQ: SUNW). Right now I hold 27,500 SUNW shares at a price of $3.75 per share. Over the coming months (maybe years) I'll be providing a Technical Analysis of Sun's products, services, communications, competitors and employee compensation. I'll be providing objective criticism with the intention of improving Sun's products and services - hence improving the value of my shares. Of course, if I feel that Sun is "going down" I'll be sure to close out my position and reflect my bear-market opinion in due course - but let's all hope for a bright future for Andy, Jon, Scott and all the guys and girls at Sun.