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Much of his opening months was spent emerging from the shadow of the highly visible Scott McNealy, boosted by Schwartz's high-profile blog. Now that the introductory period is over, Schwartz is working to show that the Silicon Valley stalwart can regain its former stature.
As Schwartz points out, Sun's stock has risen 28 percent in the year since he took over as CEO, though he credits his predecessor for the improvement. But the company has its challenges. A strong close to 2006 was followed by a spotty, if still profitable, opening to 2007, with revenue of $3.28 billion and net income of $67 million.
Schwartz is bringing his software imprint to the company, aggressively embracing the free and open-source programming movement, preferably with the upcoming version 3 of the General Public License (GPL). He's even trying to rebuild Sun's lackluster storage business by engaging with programmers interested in storage software. In a perfect Schwartz world, all customer interactions would begin with a conversation about Sun's Solaris operating system.
During Sun's JavaOne software conference earlier this month, Schwartz spoke with CNET News.com about his first year and the future of Sun.
Q: What's your own assessment of how well you've done the first year?
Schwartz: Well, it partially depends on what axis we're measuring our progress with. One that I care about the most, the long-term creation of value for our developers and shareholders, actually gave us pretty high marks. The one thing we've done indisputably is reestablished our technical relevance. The global success of JavaOne, which will probably have (had) our broadest, largest attendance ever, proves that we are very much central to the evolution of network computing.
The success of the OpenSolaris community--the fact that we have been able to drive nearly 8 million downloads in the past two years and 70 percent of those have been onto HP, Dell and IBM hardware--is a validation of our focus.
Secondarily, looking at our financial metrics, I feel pretty good. We have expanded gross margins, we've grown the top line (revenue), we generated a GAAP profit two quarters early. There's a lot more to do. We're a $14 billion company in what looks like a $2 trillion marketplace, and it seems like we've got some more growing to do. We can always be more efficient than we are right now and we've still got some work to do there.
Would you give yourself an A, B, C, D or F?
Schwartz: I'm not going to give myself a letter grade. The single best grade for my management team's performance is our share price. It's gone up. We're having such a different interaction today with customers and partners. You have to remember two or three years ago it was not a pretty picture. We had a lot of folks who were writing us off or counting us out. No one today is writing us off or counting us out.
A lot of your financial recovery has been in part because you bought a lot of revenue by acquiring StorageTek and you recovered somewhat at least in your bread-and-butter server business. What about all these other projects--Solaris and open-source software in general, storage, the Sun Grid?
Schwartz: First of all, the growth that we've posted this year has been pure organic growth. It's been more than a year since we acquired StorageTek. Second, gross margin is a derivative of the operational efficiency as much as it is the products we're building and the value we're delivering.
We will continue to invest on the edges of innovation. But at $13 billion to $14 billion in scale, to have a material impact on Sun, you're going to have $1.3 billion or $1.4 billion of revenue. That's not going to happen from any new initiative necessarily in a quarter or two or three. I would claim the single most important element in the resurgence of Sun has not been the rise not of our server business, but the rise of our Solaris business. Solaris is now firmly established as the definition of scale and security and robust Web-scale operation.
We still have some work to do--I'm still not pleased with how accessible it is to new developers or the number of college kids that are running it, but in terms of its position in the enterprise, that at this point is unassailable.
You derive some services revenue from software. Can you break out how much you get from Solaris?
Schwartz: This is a complex problem. (Suppose) I ship a (Sun Fire X4500) "Thumper" into the marketplace--it's a two-socket server that runs Solaris that has 24 terabytes of storage in it. We record that as storage revenue. Is there a reason I shouldn't record that as a server? And by the way, it runs Solaris, so shouldn't I record it as a software product? And by the way when we start giving it away for free and simply charging 4,000 bucks a month to service it, then how would I characterize it?