June 13, 2003 2:48 PM PDT

McNealy: Java gets tough

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SAN FRANCISCO--Sun Microsystems Chief Executive Scott McNealy defended the business merits of his company's Java effort Friday, saying that, despite disappointing sales of Sun's own Java software, the effort has helped keep Microsoft at bay.

During a speech at Sun's JavaOne conference here, McNealy acknowledged that Sun lags others in selling Java products such as application servers that run Java programs on servers. But he said Sun's Java language has helped the company financially by preventing Microsoft technologies from taking over.

"If everybody was doing C#, .Net and Windows, there wouldn't be a very large total available market for any Sun products," McNealy said.

Sun is trying to seize the initiative with a multimillion-dollar Java branding campaign that's designed to convince average people that they want Java devices, McNealy said in a news conference after his speech.

"We went from (the) defensive to (the) offensive," McNealy said. "It's now time to go on the offensive and say the Java brand means something."

Java, a programming language and its supporting software, lets a program run on a variety of different computers without having to be modified for each one. That universality poses a threat to Microsoft, which has been tangling with Sun over Java since not long after Sun licensed the software in 1996. Though Java hasn't displaced Windows as a foundation for running desktop computers, it is often found in two domains where Microsoft isn't as strong: servers and, increasingly, mobile phones.

Sun made several other announcements at the show this week. The Santa Clara, Calif.-based server seller unveiled a new research license intended to trigger Java innovation. It also demonstrated a new programming tool called "Rave" that's designed to make Java programming as easy as Windows programming is today.

In addition, Sun signed up Intel as a partner to optimize Java for Intel's XScale processor for mobile devices, and it joined a host of mobile phone makers in a plan to ease programming for Java on mobile phones.

Sun also signed deals under which the top two PC makers, Dell Computer and Hewlett-Packard, will ship Sun's up-to-date Java on all their desktop and laptop computers.

"I believe the HP and Dell announcements this week are really stunners," McNealy said. "Already, they're creating...a very interesting domino effect, with all the other PC manufacturers needing to understand they're going to need to bundle J2SE," he said, referring to the desktop version of Java, called Java 2 Standard Edition.

During the news conference, McNealy derided rumors that the company is an acquisition target, saying Sun's market capitalization--$17.4 billion on Friday--puts the company out of the reach of most potential buyers.

"I'm going to not vote for anything but an all-cash offer. How many nonconvicted monopolists can afford that kind of cash?" McNealy said. "This is not some two-bit fly-by night outfit that you can pick up with spare change."

Mobile market mania
Much of the activity at the show centered on mobile phones, for which Sun has dozens of partners selling phones and phone services that use Java. Many mobile phone systems use Java-based smart cards to establish the identity of the phone user. Sun argues that the cards make companies that own music, games or video comfortable selling that content and will help grow the market--for both the content and related Java phones and services.

And at least some in the industry agree, including Michael Nash, senior vice president of Internet strategy and business development for Warner Music Group, who spoke at a panel discussion Friday after McNealy's speech.

"We believe that in the next three to four years, the U.S. wireless music market could be between $500 million and $1 billion," Nash said, adding that about half of that would come from downloading customized ring tones for phones. "Globally, by 2008, it could very possibly be a $5 billion to $10 billion wireless music market. In five-and-a-half years, the wireless space could constitute somewhere between 15 (percent) to 20 percent of the global music market."

Guy Laurence, CEO for global content at Vodafone, said games are even bigger: $75 billion will be spent on downloading games for cell phones in the next 10 years in Europe, he said.

The average price for software such as a game downloaded to a Java phone is $2.50, Laurence said, with about $1.20 of that going to the developer.

Mobile phones have been more advanced and more popular in Europe and Asia, but the United States is catching up, Laurence said. "You could have said the U.S. is three years behind a couple years ago, but the delta now is about 18 months. I would imagine it would narrow more as we go into next year," Laurence said.

Digital rights management enabled by Java smart cards in phones enables "superdistribution," in which a person can download content such as music from a friend and not just from a central download site. The content owner still will be paid for the friend-to-friend transfer, Laurence said, but the distribution will be much broader.

Digital rights management is key to making the music distribution work by preventing Napster-like services that enable free content exchange, Laurence said. "We cannot afford to go the way the PC guys went and see value destruction, because then the content guys will walk away from our industry as well," he said.

Warner's Nash sees mobile technology as a way to repair the music industry's bad record in electronic music distribution.

"Having your butt kicked up around your ears in the online world gets your attention. We've been humbled," Nash said. "We will participate in the ecosystem, learn from the experts, try to figure out how to make our content available."

 

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