March 27, 2002 5:35 PM PST

Sun aiming office software at mainstream

SAN FRANCISCO--Sun Microsystems' StarOffice software package--a competitor of Microsoft Office--is moving more toward the mainstream with the coming release of version 6, Sun Chief Operating Officer Ed Zander said Wednesday.

StarOffice, which Sun acquired in 1999, has thus far failed to grow much beyond the fringes of the computing world. Sun hopes to change that with the next version by securing customers in big business and outside the United States, Zander said.

The tough task is to get the product to customers. Zander said that testimony from Gateway executives at the Microsoft antitrust trial has revealed that Microsoft's licensing agreements make it difficult for them not to use Windows XP. And to get widespread distribution of desktop software, "you've got to get AOL, or a Compaq, HP, IBM or Dell," Zander said.

Sun will announce big customers using StarOffice 6 when it's released in May, Zander said in a meeting with reporters at Sun's JavaOne conference here.

Major corporations in the United States "that you have heard of" have already made pilot installations of StarOffice, Zander said. "They aren't in full deployment, but they took a section or department and started them on StarOffice."

Sun's sales pitch: Customers shouldn't have to pay $30 million or $40 million every time they need to upgrade to a new version of Microsoft Office. And computer users typically need only basic software. "Most people on the planet need mail, a word processor, presentation, a browser and that's it," Zander said.

"Outside of the U.S.--in China, India, Brazil, the U.K.--they are starting to really deploy StarOffice" because of the cost of installing Windows XP, Zander said. Sun will come out with total cost-of-ownership calculations when it reveals the results of the U.S. trials.

The company is trying to bypass Microsoft by going to customers directly. Among new distribution deals:

• Sun said it's donating StarOffice--called StarSuite in Asia--to China's Ministry of Education. The software will be copied and distributed to students, teachers and administrators; Sun presented a master CD-ROM of version 6 Wednesday in Beijing.

• Zander signed a deal this week under which the United Kingdom's Office of Government Commerce will give StarOffice equal visibility to Microsoft Office for governmental agencies buying the software.

• MandrakeSoft, whose version of Linux is popular for desktop use, will announce Thursday that it has begun offering version 6 as a download to some premier customers who subscribe to Mandrake's subscription services.

StarOffice runs on Linux, Windows and Sun's Solaris operating system. Sun released the underlying source code at OpenOffice, enabling others to augment the software through the open-source process. The move also ensures that a free version will be available when Sun releases version 6, for which it will charge a fee less than $100, except for educational customers, who'll get a discount that's yet to be announced.

Still, Sun has a long way to go to even begin to unseat Microsoft. Analyst firm Gartner estimates that with good execution of Sun's plans, StarOffice could attain 10 percent of the market.

On Linux, Sun has competition from programs such as KDE Office, AnyWare and CodeWeavers, a company that on Wednesday began selling software called CrossOver Office that lets Microsoft Office run on Linux.

Linux, a clone of Unix and therefore a close cousin to Sun's Solaris, had been eating into sales of Sun's low-end servers. But Sun decided in February to embrace Linux and sell servers with the OS installed.

Red Hat, the top seller of Linux software and services, is explicitly targeting Unix customers. But Zander said he hopes Sun can position Linux as a competitor to Windows, not Unix.

"The real opportunity for Linux is against (Windows) NT...We are going to be the only company to go after the NT systems," Zander said, arguing that companies such as Compaq can't afford to position Linux against Windows since it would cut into their Windows server sales.

Sun made a mistake in letting "the PC guys position Linux against Unix. Linux and Unix are the same thing," Zander said.

Zander also detailed some of the perils of being in the business of selling servers during the current economic downturn. The company has been trying to diversify its customer base away from telecommunications and financial services companies--both sectors were hit harder than most recently--while increasing sales in health care, pharmaceuticals, manufacturing and the government.

Sun has been competing not just against a reinvigorated IBM, but also against used Sun products being sold on the gray market--often auctioned off by expired Internet companies.

Zander said the gray market has bought "hundreds and hundreds of millions of dollars" worth of equipment--a major fraction of Sun's revenue, which stood at $3.1 billion for the company's most recent quarter.

The gray market isn't as bad as it was earlier, but it's still a factor, Zander said. In January, a customer meeting Zander at the Super Bowl cheerfully spoke of buying a top-end E15K server for 30 percent its regular price. And Zander recounted the grim experience of watching TV reports of auctions of Webvan's servers.

On the flip side, those customers are still buying Sun systems, not those from IBM or Hewlett-Packard, and Sun has the opportunity to sell services and upgrades.

Sun is trying to cut costs to deal with the drops in revenue it has experienced. One way is by buying components such as memory through reverse auctions in which Sun pits suppliers against each other to see who can come up with the lowest price.

Sun saved $100 million on $1 billion worth of such orders in 2001, Zander said, and hopes to expand the program for purchasing office supplies such as paper.

 

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