View from the Hill:

The Emerging Bright Spots in the SPARC market

Last year was the worst year in Sun's 20 year history. The combination of the IT recession, 9/11, and Sun's shooting itself in the foot with technical problems in its cache memory (thereby blowing away its hard won reliability image advantage over Wintel) and the slowness of developing faster SPARC processors could leave you with the false impression that all was doom and gloom in the SPARC systems market.

Not so.

Despite the computer industry having a bad time in 2001 (lowlights included the first ever year to year decline in PC shipments, and the biggest ever losses in the semiconductor market) there were a few bright spots emerging which you may have missed, if you thought Sun's fortunes were typical of the SPARC market as a whole.

• The rackmount SPARC server segment continued showing double digit year on year revenue growth as customers turned to telco style packaging to reduce cost of ownership. This trend was also reported in the Intel architecture server market, and was a very fast growing segment for Dell Computer. Because rackmount configurations require a high degree of customisation and testing to meet specific user requirements, this is a segment that's not actually dominated by Sun, even though many (but not all) of the companies in this market area do use Sun motherboards. The "pile them high and ship them fast" strategy which worked so well for Sun in the boom dotcom days, doesn't work in this more conservative market segment.

• The military SPARC market started apprehensively in 2001 as manufacturers and integrators expected to feel the cold winds of the budget cuts promised by the Bush administration finally working their way through to them. But 9/11 changed all that. Most integrators in this market have been reporting publicly (and privately) an upsurge in spending. For the US government national security has replaced tax cuts as the #1 priority, and the underinvestment in security and and defense during the last few years is now seen as a mistake. 2002 and beyond will see high growth rates for companies in this area.

• The fault tolerant high-availability SPARC server market saw many companies reporting very high double digit revenue growth in 2001. Originally this was a niche segment within the telecom market, but I expect that this kind of system will branch out into the mainstream, and the whole segment could easily see 50% year on year growth in 2002. Although Sun has a toehold, it is really a bit player in this market. Nevertheless Sun benefits from supplying cPCI SPARC motherboards to some of the HA SPARC companies (although Force Computers actually ships more SPARC cPCI cards than Sun.)

• The SPARC portable market, like the Intel portable market, has not seen the same down downturn experienced on the desktop. While figures are not available, we've seen a new entrant Naturetech coming in to challenge the market leader Tadpole-Cycle. Several other companies also have toeholds in this market, and if the desktop market continues to decline during 2002, we may see more viable alternatives appearing in a portable format.

• Solid state disks (which many users are turning to, to speed up their SAN access). This segment saw a 500% year on year increase in buyer interest during 2001, and despite falling memory prices, many SSD makers reported high double digit revenue growth during that period. I expect this to accelerate during 2002, as more users become aware of the benefits of using this type of technology.

• Many companies in the Tape library segment reported double digit revenue growth during 2001 while remaining profitable. Increasing volumes of digital data everywhere make libraries the most cost effective way of archiving network information.

• The wildcard, and unexpected success story in 2001 was the huge surge in interest in iSCSI. The cutback on IT spending has made this look like an attractive option for mid range users who have not yet wired up with Fibre-channel. It offers the promise of getting some SAN functionality by leveraging existing IP networks. Capability is one thing, but performance is another. But many users will be happy to use the off-site disk synchronization offered by iSCSI and don't really need the faster performance of fibre-channel in their internal networks. There are few real products in this market, and many vendors have been taken by surprise by the speed with which this new concept has been picked up by the user community. If "interest" translates into "buying" then this will be one of the fastest growing product areas in 2002, and could do much to restore the sagging fortunes of Cisco and other IP switch makers.

SPARC manufacturers

Sun SPARC resellers - USA

Sun SPARC resellers - UK

SPARC based computers

SBus, PCI & cPCI cards

STORAGE

KVM Switches

Rackmount SPARC