August 26, 2004 1:45 PM PDT

Sun to tout Wall Street wins in September

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Struggling Sun Microsystems will try to show next month that it still has a lot of friends in the financial community.

On Sept. 21, the Mountain View, Calif.-based company will hold a press conference in New York to show how various financial firms have begun to conduct trials with Solaris 10, the next version of its flagship operating system, and to install Sun's Opteron-based servers.

Wall Street's endorsement is crucial for Sun. Financial losses, layoffs and declining market share have characterized the company over the past few years. The financial community was one of Sun's three chief markets.

"They've slipped considerably in financial services. Linux has made big inroads there," said Gordon Haff, an analyst at Illuminata.

The comeback is already under way, asserted John Fowler, executive vice president of the network systems group at Sun. In the quarter that ended in June, revenue rose over the same period the year before, reversing a three-year trend, although the company still lost money in its most recent fiscal year.

Earlier this week, research firm Gartner noted that Sun, while way behind Hewlett-Packard, IBM and Dell in terms of units shipped, had the highest growth rate--38.4 percent--of the big four in terms of units in the second quarter.

Hewlett-Packard--which recently reported lower-than-expected sales in its server and storage group--and Linux developer Red Hat will be the targets of much of Sun's activity.

"Tandem and Alpha are zombies, at this point," Fowler said, referring to two of HP's high-end server families. "People know they are going to have to move."

Solaris 10 provides a number of enhancements, said Stuart Wells, senior vice president of financial services at Sun. Dynamic Tracing, for instance, enables IT departments to more rapidly tune applications, which, in turn, can lead to higher performance and/or lower costs. Ultimately, Sun hopes that these sorts of additions will demonstrate that running Solaris--either on classic UltraSparc-based servers or Sun's Opteron boxes--is cheaper than running Linux, he said.

One anecdote that will surely be retold on Sept. 21 involves a large financial institution. The company has two employees dedicated to running a Solaris server farm and 42 managing a similar Linux one, according to Sun.

Still, "the biggest challenge we face is going to customers and methodically proving it," Fowler said.

On paper, the strategy makes sense, Haff said. Financial services firms have gravitated to Linux because it runs on relatively cheap hardware. If Sun can neutralize that advantage with Solaris 10/Opteron servers, it can win back customers. Still, Sun will be selling less expensive products than it did in the past, so it won't likely see a return to the revenue figures it saw in its glory days.

Sun has also conducted internal reorganizations to get its different divisions to work more closely together, he added. In previous years, Sun's different divisions were rewarded for growth in revenue and margin for their own products. Now performance goals are more closely tied to customer wins.

There are currently seven fairly well-known Wall Street firms, along with other companies in Europe, running Solaris 10 trials, Wells said. Some companies have also signed service agreements with Sun concerning the operating system, he added, a strong indication that the companies will adopt the OS for operations. The concerted effort to woo Wall Street began about three months ago, the executives said.

Sun will formally release Solaris 10 toward the end of the year.

Sun and AMD
Sales of Sun's Opteron servers have also begun to steadily trend upward, Fowler said. Until recently, Sun dedicated almost all of its energy to promoting servers based on its own UltraSparc chip. The company released Intel- and Advanced Micro Devices-based servers in the past but often treated them like uncouth relatives in for the weekend.

The party line has since changed, and Sun expects to increasingly take advantage of the component technology from other companies, such as AMD and Fujitsu (which is adding technology to the UltraSparc line).

The push for Opteron, however, does mean that at least for now, Sun must promote Linux. Approximately 70 percent to 80 percent of Sun's Opteron servers ship with Linux, Fowler said.

 

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