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2001, April week 3

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Sun Microsystems Sun's Revenue Growth Hits Brick Wall

PALO ALTO, CA - April 19, 2001 - Sun Microsystems, Inc., (NASDAQ: SUNW) today reported results for the third quarter of fiscal year 2001, which ended April 1, 2001. Revenues for the third quarter were $4.095 billion, up 2 percent compared with the third quarter of fiscal 2000. Orders for the third quarter were $3.612 billion.

For the first nine months of fiscal 2001, Sun reported revenues of $14.255 billion, up 33 percent compared with last year's revenues of $10.705 billion.

"Despite the economic slowdown in the United States, we were able to increase revenues over the very strong growth rate (35 percent) during the same quarter a year ago," said Scott McNealy, Chief Executive Officer of Sun Microsystems. McNealy added, "These results, coupled with our strong cash position of over $7 billion, enable SUN to continue protecting our investments in new products, R&D, our sales and service capabilities, and top-notch employees."

Editor's note:- despite the gloss in Sun's full press release, this was a disasterous quarter, compared to EMC, IBM and others who operate in the same space. See also my comments in the column on the right .
Sun's Revenue Growth Hits Brick Wall

Tadpole Wins Computer Systems Orders In Excess Of $8 Million For Its New, High-Density Compute Server Lines

Sun Lowers Prices on UltraSPARC[Tm] Ii Servers

Interphase Announces New Fibre Channel Software Drivers

Tadpole-Cycle Appoints Hartley Director Of Worldwide Portable Sales

SBS Technologies, Inc. Reports Third Quarter Results

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View from the Hill

Why Did Sun's Revenue Growth Hit a Brick Wall?


Maybe we should have seen it coming. Sun's 2% revenue growth compared to the same quarter a year ago is because it has lost its easiest customers. A year ago, in the first quarter of 2000, you could be forgiven for believing that the first things that most newly enriched dot-coms did with their investor's money were

  • book their TV advertising
  • order a bunch of Sun servers to show to visitors. Because they were working on Internet time, it was better to hit the ground running. They could figure out the direction later.
But let's do a reality check here... Despite the dot-bombs and the recession, the results from many other companies which I track in the enterprise computing market suggest that big iron is still selling like hot cakes, and I have no reason to doubt that Sun's core business:- enterprise class servers will continue to grow at a fast rate, as conventional brick and mortar style companies crank up their business efficiency and install CRM (Customer Relationship Management) which eat up MIPS faster than any other business applications. So what's going wrong in Sun?

My guess is that Sun is now involved in far too many product areas where other companies do things better. For example:-
  • in storage - they should give up the not invented here syndrome and resell more products from other best of breed companies. This is not new advice. I said this in an article last year. Since then, the gap between Sun and the storage leaders has widened.
  • on the desktop - just give up the low end desktop workstation market. The desktop PC market sucks anyway (to misquote IBM's Louis V. Gerstner, Jr., IBM chairman and chief executive officer, who actually said recently "The desktop segment is hurting -- and it is not just a cyclical issue. This is a mature business, and it no longer drives the economics of the IT industry." Sun has been losing market share on the desktop for years, so why waste good marketing resources in a deadbeat market?
  • everything that's not directly related to SPARC servers should be regarded as suspect, and draining resource away from the best part of the business. That includes Java and the countless other initiatives which Sun announces, every couple of days it seems, in software, wireless etc etc.
  • stop trying to kill the reseller channel. Unless Sun decides to become a super reseller (like Compaq) the reality is that most users still need a lot of stuff which Sun doesn't make, such as routers, switches, and best of breed storage. Also most people in the real world need more than Oracle and iPlanet stuff, so resellers are needed to install and integrate applications. During the last year, watching Sun's many activities aimed at bypassing the reseller channel, which in fact was partly responsible for their original success, has seemed like watching someone unravelling their knitting.
Long term I think there's a very sound business in Sun, which has excellent growth potential, if you cut out the dead wood, and non-core fringes.Recession or no recession.

But if they don't sharpen up their focus, they will lose their magic touch, and results like those we've just seen may become more common.
.


Tadpole-Cycle
Tadpole Wins Computer Systems Orders In Excess Of $8 Million For Its New, High-Density Compute Server Lines

Cambridge, April 19, 2001 - Tadpole Technology plc today announces that its Tadpole-Cycle business unit has won orders in excess of $8 million from a major semiconductor design vendor in the communications market for its new lines of high-density, dual processor computer servers. Called Tadpole Compute Servers, and built around Sun Microsystems' new UltraSPARC III processor, the order covers the supply of more than 250 of these compute-intensive, rack mounted, computer engines.

This is the most significant business won by Tadpole-Cycle since being formed in December 2000 following the acquisition of Cycle Computer Corporation and its merger with Tadpole's existing hardware business, Tadpole-RDI.

Bernard Hulme, group chief executive of Tadpole Technology plc, comments: "These orders in excess of $8 million further validates Tadpole's business model and strategy of becoming a significant player in such markets as electronic design automation where providing networked compute infrastructure is key." ...Tadpole-Cycle profile
Sun Microsystems Sun Lowers Prices on UltraSPARC[Tm] II Servers

PALO ALTO, CA - April 18, 2001 - Sun Microsystems, Inc. today said that it is reducing prices on its UltraSPARC[tm] II processor-based Sun Enterprise[tm] 3500 to 6500 servers by as much as 16 percent. The announcement follows closely the introduction and shipping of Sun's new UltraSPARC III processor-based Sun Fire[tm] 3800 to 6800 midframe servers. The company also announced price reductions for its flagship Sun Enterprise 10000 system, also known as Starfire[tm].

The price of the Sun Enterprise 10000 server has been reduced by up to 16 percent for an average 32-processor system, further lowering the Starfire system's total cost of ownership compared to mainframes and high-end offerings from other vendors. Additionally, the prices of Capacity On Demand (COD) Sun Enterprise 10000 systems and Right-to-Use licenses were reduced by up to 28 percent. Sun's COD program allows customers to purchase a smaller Starfire system with additional, unused processors preinstalled, then later upgrade their systems instantaneously by purchasing licenses to activate the unused processors. ...Sun Microsystems profile
Interphase Interphase Announces New Fibre Channel Software Drivers

DALLAS, Texas, April 18, 2001 - Interphase Corporation today announced general availability of its new PowerSAN™ version 3.3 device drivers and FibreView™ Enterprise management software. The release supports the complete PowerSAN suite of host bus adapters (HBAs), including the new 6020 dual port 2Gbps PCI-X Fibre Channel HBA. The 3.3 release also features improved support for clustering in Windows 2000 environments, and provides operating system support for Windows NT, Open Source Linux®, Solaris™ and Novell Netware®.

The new edition software includes support for the 4526 PMC Fibre Channel controller, which works with either VME or CompactPCI® systems. The inclusion of the Solaris 8 device driver gives telecom servers the ability to enable the high-bandwidth storage necessary for next-generation telecommunications applications. ...Interphase profile
Tadpole-Cycle
Tadpole-Cycle Appoints Hartley Director Of Worldwide Portable Sales

Carlsbad (CA) and Cambridge (UK), April 18, 2001 - Tadpole-Cycle, Inc. today announced the appointment of David B. Hartley as director of worldwide sales, portable products. Hartley is a skilled business leader with a successful sales and marketing track record in global, business-to-business, multiple-channel IT enterprises. Prior to his latest appointment, Hartley was director of channel management at Tadpole-Cycle and was responsible for strengthening Tadpole's specialist routes to market.

An ex-Captain in the US Army and holder of a BS in Industrial Management from the University of Rhode Island, Hartley began his commercial career at Xerox Corporation. Subsequent appointments include vice-president, worldwide sales for digital audio workstations vendor Timeline, Inc., vice-president, sales and marketing for multimedia software vendor Aware, Inc., and general manager for the consumable and peripheral business unit of Datagraphix, Inc.

Una Richens, vice president of sales and marketing at Tadpole-Cycle, comments: "The global nature of Tadpole-Cycle's business requires deep understanding of the specific requirements of key markets and David Hartley has the necessary skillset to further develop Tadpole's revenues in the Sun portable computing space." ...Tadpole-Cycle profile
SBS Technologies
SBS Technologies, Inc. Reports Third Quarter Results

Albuquerque, NM – April 17, 2001 – SBS Technologies, Inc. (Nasdaq: SBSE) today announced the results of its fiscal year 2001 third quarter and nine months ended March 31, 2001. Sales for the third quarter were $48.5 million, a 62% increase over the $29.9 million in sales for the third quarter of the prior fiscal year, and a 1% decline compared to the $49.1 million in sales for the second quarter of the current fiscal year. Net income for the quarter ended March 31, 2001 was $4.4 million, a 49% increase over the $2.9 million reported net income for the third quarter of the prior fiscal year.

Sales for the nine months ended March 31, 2001 were $141.3 million, a 56% increase over the $90.3 million in sales for the nine months ended March 31, 2000.

"We are pleased with our third quarter financial results, as the company continued to perform well during turbulent market conditions. Our broad product line and diverse customer base has again proven to be a real asset. All three of our operating segments experienced good sales growth compared to last year's third quarter. Although sales from our Communications Group were impacted by a slowdown from several telecommunications infrastructure customers, sales for this segment increased 109% over the third quarter of last year. We enjoyed excellent growth from our Computer Group, as sales increased 40% over the prior year third quarter, with good growth from all product lines. In addition, sales from our Aerospace Group increased 17% compared to last year's third quarter. New order bookings exceeded quarterly sales for the seventh consecutive quarter. Although we did remove a $5.1 million order from our backlog that was booked during the last fiscal year from one of our industrial customers, we ended the third quarter with a solid $66 million in total backlog," said Grahame Rance, President and Chief Executive Officer of SBS Technologies. ...SBS Technologies profile

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