Sun signs server software customer

Sun Microsystems has signed European telecommunications company Orange as a major customer for its Java Enterprise System server software, the companies plan to announce Monday.

Sun sells the Java Enterprise System (JES) server software at a price of $100 per employee per year, letting the customer use as many of the packages as desired. Orange, the mobile-phone arm of France Telecom, has 22,000 employees and will deploy the software over three years.

Sun's JES growth rate tapered off in the company's most recent quarter, which ended Sept. 26. Sun had lured 81,000 new subscribers in the first three months of 2004 and 129,000 during the next three months--but only 42,000 during the following three months.

The company's JES software includes components for handling e-mail, running Java programs and storing directory information such as usernames. It competes with products from IBM, Microsoft, BEA Systems, Red Hat and Novell. JES and the Solaris operating system are the stars of Sun's effort to become a major software seller.

To date, the Palo Alto, Calif.-based company has sold about 345,000 annual subscriptions for JES, Sun Chief Executive Scott McNealy said in an interview Thursday. "That's a $35 million annual recurring revenue run rate," he said, and each copy of JES "has to run on Sun equipment."

Sanford C. Bernstein analyst Toni Sacconaghi gave a less-rosy assessment in a report Friday.

"JES growth sputtered in the quarter, a worrisome leading indicator," Sacconaghi wrote. "While the total cumulative subscriber base grew, new JES subscriber additions declined year over year by 10 percent (from 46,000 to 42,000), which is somewhat worrisome, since this is only the fifth quarter that Sun has been offering JES."

The JES pricing favors customers whose computer operations support their own clients. With traditional software pricing, that customer would typically have to pay more license fees as it added new e-mail boxes, directory entries or other features. With JES, the customer only pays if it hires new employees.

Orange is already a Sun customer, with about 1,300 Sun servers running in its data centers.