April 25, 2006 6:45 PM PDT
Sun: Same song, second verse?
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But McNealy's bullish forecasts in recent quarters haven't been justified, Kariithi said. "They were eternally optimistic about their business model--optimistic to a fault," Kariithi said. "They always thought they were going to turn the quarter in the next quarter."
Sun's new server initiatives have showed some promise, though.
The x86 server business currently brings in about $100 million per quarter, Schwartz said, with shipments increasing 81 percent over last year to about 24,000--more than a quarter of the company's shipments.
And in the try-and-buy program that lets customers use an UltraSparc T1 machine free for 60 days, more than 50 percent of participants end up buying the system. Sun last week expanded the try-and-buy program to Galaxy servers, and Schwartz said more is to come: "We're going to roll it out across all the products we have at Sun."
Even one of Sun's biggest competitors--Bill Zeitler, head of IBM's systems and technology group--gives the company credit for its recent moves.
"I think the move to OpenSolaris has been a good one. The move to open up their portfolio to Opteron (AMD's x86 server chip) and away from Sparc and moderate their investments there is a smart thing strategically," Zeitler said Tuesday. "Were I sitting there, those are the things I would have done."
There were bright financial spots as well, with $197 million in cash flow from operations despite Sun's $209 million loss in its most recent quarter. Revenue from the United States grew 35 percent, and even excluding revenue from the acquisitions of StorageTek and SeeBeyond, revenue grew at 12 percent, Chief Financial Officer Mike Lehman said. "This was the first quarter in nearly two years that we saw year-over-year growth in the former Sun stand-alone business. We do not believe it is a one-time occurrence," Lehman said.
Aligned and engaged
Even if Sun may change, McNealy and Schwartz are undoubtedly more similar than different.
"We're different people, but we have the same values," Schwartz said. "We both believe intellectual property is a source of differentiation. We both believe in simplicity as a competitive weapon. We both believe in building the largest community possible and sharing our intellectual property to ensure that market grows. We both believe in the value of innovation and value of innovators."
Because of that agreement, "We have been in lockstep on a number of issues in the last four or five years," Schwartz said.
McNealy agreed: "He and I can finish each other's sentences. We're very aligned strategically."
And they both hog the spotlight to advance Sun's agenda--McNealy with snarky one-liners and Schwartz with a high-profile executive blog. "I'm a lot more verbose. That's why I write a blog. It takes me seven screenfuls to get to the same conclusion," Schwartz said.
Schwartz explicitly said McNealy will continue to be closely involved in Sun affairs. For most people, "you love your job or you love your boss. I've been in the rare position of both," Schwartz said. Then, addressing McNealy, he added, "I admire the hell out of you, and I'm looking forward to your support for the next 10 years."
But Umesh Ramakrishnan, a vice chairman of executive search firm Christian & Timbers, believes market pressures will push Schwartz to the fore and McNealy into the shadows. "I think you'll see Jonathan singing a whole different tune"--one with "severe cost reduction" and "a more focused vision of the company," he said.
Schwartz is young but up to the challenge, Ramakrishnan said.
"This guy is a bright guy. Both on a strategic and tactical level he's proved himself," he said. "I certainly believe he's the right guy for the job."