Sun Microsystems is a pioneering tech company that is having trouble getting any respect.
A Forbes article on Thursday notes that the company's market cap has dropped below $3 billion: "The company has become so toxic that no one dares to swallow it."
As Sun CEO Jonathan Schwartz likes to say, the Forbes writers "over-rotate." But Sun has fallen further and harder on Wall Street than its main competitors over the last few years and months. Schwartz has bravely pushed Sun down the path of open source and created demand for its hardware and service via free software, but the big payoff has been slow in materializing. Add in the crumbling economy, and Sun has no choice but to take cost out of its business model.
From a stock market perspective, Sun has fallen further than its competitors.
(Credit: Yahoo)This morning, Sun revealed that it is taking the headcount reduction route to profitability, letting go of 15 percent to 18 percent (up to 6,000 employees) of its global workforce and taking a charge of $500 million to $600 million over the next year. The headcount reduction will reduce annual expenses by $700 million to $800 million.
The economic reality is that 2009 isn't going to be a good year for the tech industry. Sun is facing reality with the cuts. Other tech companies will follow with headcount reductions too. This week, IDC cut its 2009 growth rate for spending on tech by enterprise companies worldwide from 5.9 percent to 2.6 percent. The U.S. growth rate for next year was revised from 4.2 percent to 0.9 percent.
Sun CEO Jonathan Schwartz
(Credit: Dan Farber/CNET News)In the Forbes article, various analysts who cover Sun suggest ways, in addition to headcount reduction, that the company could become more profitable. Among the suggestions: selling the Sparc microprocessor business to Fujitsu, spinning out the Java language group, dropping the low-end hardware business, and selling more customized servers to cloud computing providers.
In an e-mail response Thursday night to my query about the Forbes article--and just hours prior to announcing the layoffs--Schwartz gave his take on the substance of the Forbes piece:
Various analysts have told me our revenue was $299 million last quarter (it was $2.9 billion), that we should lay off 50,000 employees (that would be more than 100% of our employees), that no "real" companies use open source (I guess Google and GE don't count), that we're losing customers in droves (we gained customers last quarter), that we're losing cash (we generated more than $150m last quarter), that Niagara/SPARC is a niche (it was a billion dollar a year business, growing 80% last quarter), that we're losing share on x86 (our biggest competitor was down 18% last quarter, but we grew more than 4%), and that we lost $1.7 billion in cash last quarter (no - we impaired a goodwill asset, just like CNET's parent company, CBS, wrote down $14 billion - it's an accounting change).
So, I'm a tad skeptical of folks looking for sensational column inches... we're very comfortable we're on the right path. We had more than 1,000 requests for our new ZFS-based Storage platforms just a day after launch. And we're deluged with requests from big customers wanting to talk about open source adoption as a vehicle to reduce proprietary licensing fees.
But with even larger companies pre-announcing 15% revenue declines, it's evident the whole industry's got some challenges. I understand everyone's worried, but sensationalism belongs on grocery store checkout counters, not in the business press.
Schwartz is waiting for the world to change, to move to more of a cloud computing model where Sun can power millions of data centers with its hardware, software, and services. This model requires that Sun get more than a fair share of the market compared with competitors like IBM, Hewlett-Packard, Dell and eventually Google. Open-source, free software is Sun's disruptive element. Schwartz maintains that free software brings the marginal cost to acquire a customer to zero and helps drive revenue.
"The majority is going to buy hardware (to run the free software), and not just from Sun," Schwartz said earlier this year.
If Sun cannot intercept enough of the enormous demand for its hardware and services in the coming cloud era, no amount of headcount reduction will earn Sun the respect it craves.
If you weren't aware, a war--more like a tug-of-war--is happening in the mobile space. The iPhone is quickly rising as the development platform to beat, despite its paltry share of market versus Nokia (Symbian), Java BREW, Blackberry and Microsoft Mobile. In addition, Google's fledgling open-source Android platform is also a challenger to the incumbents.
At a Mobile Web Wars Roundtable held by TechCrunch more than 20 mobile wonks discussed that state of mobile platforms (see the list of participants below). The purpose of the roundtable was to determine which mobile platform is best for developers. The iPhone has set a new standard for smartphones and most importantly developers are fawning over it, and iPhone users appear to be far more active users than those on other phone platforms. In the first few weeks of iPhone 3G more than 30 million applications have been downloaded.
Another iPhone advantage is that it takes the iterative model of Web development and extends it to the mobile client, said Jed Stremel, director of mobile at Facebook.
But the iPhone is not the universal answer from a business perspective. Loopt CEO Sam Altman said his strategy is choose a single platform (the iPhone) and if a feature becomes popular bring it to other platforms.
David Hornik and Tom Conrad
(Credit: Dan Farber)David Hornik of August Capital said that he is excited about iPhone because thousands of applications were distributed after it launched--living proof of the viability of the platform. Like Facebook applications, VCs see some potential in funding in iPhone developers. Having the iPhone app store and not having to go through the carriers to access applications is a bonus for distribution. Omar Hamoui, CEO of AdMob, said the value of ads on the iPhone served by his company is three times other platforms.
But the iPhone doesn't have a sizable market yet, compared to Facebook or Windows, Hornik said. "It's not venture scale," he said. Venture capitalist Richard Wong of Accel made the case that there aren't any developers creating applications just for the iPhone today. "It's about finding the largest addressable audience," said Walt Doyle, CEO of uLocate. Yahoo supports everything under the mobile sun and reaches 600 million devices with its mobile services, according to Marc Davis, chief scientist for Yahoo's mobile group.
Mike Arrington, Bart Decrem, Jed Stremel and David Rivas debate iPhone vs. Nokia Symbian and other topics.
(Credit: Dan Farber)The idea that the iPhone has invented or is reinventing the mobile Web is an overstatement, according to David Rivas, Nokia, vice president of Technology Management for S60 Software, citing Japan and Korea as far ahead of the U.S. in mobile usage. "The idea that there wasn't a mobile before the iPhone is absurd," Rivas said. He also defended Nokia's recently open-sourced S60 platform, saying that it has applications similar to what are available on the iPhone. On the other hand, it doesn't have the buzz or browser of the iPhone, but Nokia produces a phone every 14 seconds, garnering 60 percent of the market. Rivas was asked about a merging of Symbian and Android, and responded that there are no such plans.
Tom Conrad, CTO of music service Pandora, said that the iPhone is fundamentally better for streaming devices and as a multifunction device appeals to consumers in different ways than other phones. Regarding Google's Android platform, Conrad said, "I need Android like I need a hole in the head. The last thing I need from a technology standpoint is a platform that sits on top of buggy firmware, with hundreds of phone manufacturers and different screens."
Loopt's Altman gave Android credit for being more open and capable of running background processes. Jason Devitt of Skydeck gave RIM (Blackberry) props for getting email right and noted that Android has serious challenges ahead. "The biggest challenge for Android is that it is totally dependent on hardware manufacturers and for the carriers to deliver," he said. This is distinct from the iPhone and Blackberry approaches, in which the devices are completely controlled by Apple and RIM, respectively. Developers are taking a wait-and-see approach to Android, which lacks any user base currently.
In summary, developers are enamored of the iPhone and hope that Apple sells hundreds of millions of units, but they will spend their development time and dollars on whatever platforms have volume.
Mobile Platform War participants:
David Rivas, Nokia, Vice President of Technology Management for S60 Software
Walt Doyle, CEO Ulocate
Tom Conrad, CTO Pandora
Greg Yardley, CEO of Pinch Media CEO
Bart Decrem, CEO of Tapulous
David Hornik, partner, August Capital
Jed Stremel, Director of Mobile at Facebook
Guy Ben-Artzi, Founder of Real Dice and CEO of Mytopia
Jason Devitt, CEO of Skydeck
Gannon Hall, CMO of Kyte
Sam Altman, CEO of Loopt
Marc Davis, chief scientist, Yahoo mobile group
Omar Hamoui, CEO of AdMob
Richard Wong, partner at Accel
Andreas Weigend, former chief scientist, Amazon
Tatsuki Tomita, SVP of Consumer Product, OperaMike Rowehl, chief architect, SkyFire
Mary Ann Cotter, CEO Cooking Capsules
John Faith , GM and VP of Mobile for MySpace
In this week's EIC Squared podcast, ZDNet's Larry Dignan and I discuss the latest news from SAP, Sun Microsystems, Advanced Micro Devices, and Microhoo. At SAP's Sapphire conference this week, company executives explained the delayed rollout of the new on-demand enterprise suite, Business ByDesign. SAP CEO Henning Kagermann said that the total cost of ownership (TCO) equation on Business ByDesign and the upgrade procedures weren't good enough:
"We know we can have TCO, but need NetWeaver enhancements. There's a very close link between the TCO of Business ByDesign and NetWeaver. The TCO is not so much hardware; There are too many processing steps in our hosting. We can continue to do manual steps when first upgrade Business ByDesign from 1.0 to 1.1, but it's not predictable in way where every client got it at once and in the same way."
Larry remarks on AMD's lack of transparency about its chip fabrication plans and product roadmap, and I recap my visit to JavaOne, where I met rocker Neil Young and interviewed Sun CEO Jonathan Schwartz about his plans for JavaFX and cloud computing. Schwartz has a good plan, but getting developers on board will take some heavy lifting.
We also debate whether Microsoft is open to a union with Yahoo after the parting of ways.
SAN FRANCISCO--While an interview with Neil Young has been my big highlight of JavaOne, I also managed to hook up with Sun CEO Jonathan Schwartz for a video interview. We talked about Project Hydrazine, a new cloud computing initiative with services similar to what Google and Amazon.com offer. We also discussed JavaFX, Sun's competitor to Adobe AIR and Microsoft Silverlight, and Project Insight, which is designed to gather instrumented user action data via JavaFX and provide it to developers.
JavaFX, which includes a runtime, scripting, and a media framework, could have a hard time competing with Adobe and Silverlight, which means attracting developers to the platform could be a challenge. But Sun has a powerful platform accelerant--85 percent of cell phones, 91 percent of desktops, and 100 percent of all Blu-ray Disc players run Java and can be automatically updated to run JavaFX.
Project Hydrazine is slated to deliver immersive, creative experiences in the cloud via services. Rich Green, executive vice president of software at Sun, told me that a storage service, similar to Amazon's S3, would be available later this year. The company is also working on tools to make it easier for developers, as well as consumers, to mash up applications.
Sun CTO Robert Brewin described the emergent Project Hydrazine as a combination of Amazon Elastic Compute Cloud, Microsoft Live Mesh and Google Analytics.
Green also said that e-mail, calendaring, and messaging services would be available as cloud services this year. While Sun isn't widely known for its e-mail services, the Sun Java Communications Suite powers companies such as Verizon.
Project Hydrazine will run on Sun's Network.com platform, which is mostly employed as pay-per-use computing infrastructure for high-performance computing applications.
Sun has to be both an arms dealer to the Amazons, eBays and telcos of the world, and also a direct supplier of infrastructure services.
"It's important for us to be a neutral technology supplier to developers and to operate as a service for those who don't have the wherewithal to buy their own infrastructure," Schwartz told me off camera. "Network.com is the backplane for everything we build--servers, MySQL, JavaFX, tape storage, and the software stack." It's the latest instantiation of Sun's slogan, "The network is the computer."
As an example of its arms dealer persona, Sun announced this week that it is partnering with Amazon to offer OpenSolaris as an on-demand service Amazon's Elastic Compute Cloud (EC2).
Sun has the elements to provide high performance and reliable infrastructure. Now, Schwartz needs to show that his company can intercept the increasing demand for the hardware and software required for the wired planet.
Editor's note: News.com's Dan Farber reported Young's keynote speech and a follow-up Q&A live from JavaOne.
SAN FRANCISCO--At JavaOne here, Neil Young showed off his multimedia project that chronicles his music career and uses Java to do so.
Neil Young and Sun CEO Jonathan Schwartz
(Credit: Dan Farber/CNET News.com)Young said he tried to do the project on DVD, but users couldn't watch the high-resolution video and listen to the music at the same time. With Java and Blu-ray, the content can be updated and offer the best viewing and listening experience, as well as great navigation and design. "Storage is the only limit," Young said, and recommended the Sony's PlayStation 3 as the best way to view his project.
Users will be able to download any archival materials, which are automatically assigned to their place in a chronological time line, Young said.
In a meeting with a few press members following the JavaOne keynote, Young talked about the Archive project, which goes back to the late 1980s. The first stage, he said, was collecting the materials.
"I am kind of a pack rat," he said, adding that over the years he's accumulated a lot of unreleased material. "I only give the record company what I want people to hear at the time. So I have a lot of unreleased material. Putting it all together tells a much different story than just what has been produced (for public consumption)."
The compilation of the unpublished clips helps show Young's musical evolution, the effects of success, and the ups and downs, he said. In the beginning, he said, he was nervous and talked a lot, but was very focused on singing his songs. "I'd make a lot of jokes and then sing a tear-jerker song."
Young was asked how music and technology go together. "There is a lot of math; it is emotional math," he replied.
Larry Johnson, of Shakey Films (which works on all of Young's films), said Young had the concept for his latest project on paper 15 years ago. About two years ago, they put the footage all together and waited for the Blu-ray HD-DVD fight to end.
"We are cramming the disc full with every feature we can," Young said.
They started off envisioning it to be something like a video game, a "3D tumbling experience through time," he said. "You could see the history of the world and other great performances through time. It would be a nice thing to do. Hopefully we will get this approach done, but by the time we are halfway through, it will morph."
"The recording business as we know it is changing. As an artist I try to remove myself from the business," Young said. "I steer myself away from that...the commerce of distributing music will work itself out."
He added: "We are trying to give them quality whether they want it or not. You can degrade it as much as you want, we just don't want our name on it." People are taking music and doing whatever they want with it, he said. "The laws don't matter. These are people in their bedroom doing what they want. It's the new radio."
Young said you can't be "scared or paranoid about trying to survive." Sure, when the digital revolution came along, it was "like getting hit with icepicks." Now, he said, the ice is tiny, maybe a little like snow.
That said, he's clearly not a fan of MP3 quality: "Putting on a headphone and listening to MP3 is like hell," he said.
Of course, digital and multitrack recordings in the '80s didn't sound so great either. The sound was shallow, he said. Now, he said, audio quality is climbing, though he still makes all his recordings in analog. "I plan to dumb my analog to the higher level so masses can enjoy it," he said.
Besides music, Young is working with engineers and developers to create a car that doesn't require roadside refueling. He is working with a variety of developers and scientists to develop a large, American-style car that doesn't require fossil fuels. "I have trained myself to take this on," he said.
"America is full of big people; it's a huge country and the wind blows. I don't want to have cars blown off the road with high winds," Young said. "We work with aerodynamics, and there's the X Prize effort to get 100 miles per gallon." Scientists are working on interesting concepts such as cars running on compressed air with stackable motors on the wheels, he said. Other solutions are more fringe.
"It's very kooky. People say you are nuts but I am used to that," he said. "People are so paranoid about the power establishment. That's what they think about when you come up with an idea that is going to bring change."
Young said that he wasn't interested in the Tesla, a sporty and expensive electric car. "The Tesla isn't ready to buy yet--you have to plug it in," he said.
Young said that he is an "overseer" more than carrying on a day-to-day role in his electric car project.
He lauded the Internet because it's a great place to find science experts all over the world. "People who are just kooks," he said. "You have to filter and separate and look on the perimeter of scientific world and give them encouragement."
Young is planning to chronicle the damage cars are doing to the environment and the development of a car that doesn't require roadside fueling in a new movie. The car will be wired to the gills, with all kinds of sensors and cameras feeding data, Young said.
On surveillance, Young said, "Surveillance society is out of control. There is nothing you can do. You can fight it...there will be an ongoing battle for privacy."
James Gosling, the so-called father of Java, catapults T-shirts toward the JavaOne audience.
(Credit: Dan Farber/CNET News.com)SAN FRANCISCO--Following a flurry of T-shirts catapulted by Java creator James Gosling and a hot dance troop performance, 75 hours of JavaOne got under way here this week. Sun Microsystems' software chief, Rich Green, took the stage to talk about consumers, people he sees as driving change.
"Information is crossing the moat, escaping the castle," he said. "The private information network is gone." Enterprises have to recognize that the enterprise moat barriers are coming down, he added, with consumers driving innovation.
Rich Green, Sun's software chief, emphasizes consumer innovation on the JavaOne stage.
(Credit: Dan Farber/CNET News.com)As part of Sun's effort to enable consumers to innovate, Green introduced JavaFX, a rich Internet application environment set to compete with Adobe Systems' AIR and Microsoft's Silverlight.
He showed a JavaFX application with Flickr and Twitter feeds running in Facebook within the browser, and then he dragged it out of the browser--to the desktop. The same application also was shown running on a Java-enabled phone via JavaFX Mobile.
Unfortunately, the application, using the new Java Update 10 browser plug-in, kept crashing. "It's the size of the pipes in Moscone Center," Green complained. "This is the Moscone terror moment."
Sun is hoping to tap into 2.2 billion mobile devices and the vast majority of desktop PCs that are Java-enabled. JavaFX was shown running on Google's Android mobile platform. Green noted that 85 percent of cell phones, 91 percent of desktops, and 100 percent of all Blu-ray Disc players will run JavaFX.
JavaFX applications will run across desktops, browsers, and mobile devices.
(Credit: Sun Microsystems)Sun also plans to deliver JavaFX from the cloud and to gather instrumented user action data via JavaFX that goes back to developers. It could be used for advertising or to provide information to customers, Green said.
Sun plans to deliver the first version of JavaFX Desktop and browsers in the fall. The mobile version is slated for the spring of 2009. Developers can get early access to the JavaFX runtime.
See also: Dana Gardner's post "Profits-strapped Sun continues decade-long pitch to developers on Java dominance"
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