sparc article the most complete guide to SPARC® based systems and suppliers sparc search

View from the Hill:-

Why Sun's Fortunes will Look a Lot Brighter in 2003

January 7, 2003 article by Zsolt Kerekes
See also:- article:- How Sun can pull out of its slump? - by Paul Murphy
article:- the Top #10 SPARC Systems Companies
article:- Everyone's bashing Sun. So will SPARC survive?
article:- Chewing over the Storage Market in 2002
more articles, Linux portals, SPARC News, STORAGE News, Market research, SPARC History
Zsolt Kerekes - Publisher
Zsolt Kerekes is editor and publisher
of the SPARC Product Directory and
STORAGEsearch.

click for more info

I'm starting the New Year with a more positive outlook on the prospects for Sun's SPARC server business. Methinks that Sun's revenue will grow and that Sun is going to look smarter than its main competitors (again).

No. It's not because I've found my white hairs turning back to grey. And I haven't been eating mouldy old Christmas cake (which can cause hallucinations) either. Here are my good solid reasons:-

  • Sun's over dependence on ephemeral dotcom companies is now ancient history.

    The customers they've got now are the same solid organizations in government, banking, manufacturing and research which they had before the dotcom bubble. Their surviving telco and ISP customers are the ones which made it with solid business plans. You're only as good as your customers. Sun's customers are great companies. They have real problems with increasing server demands, security risks, and reliability etc which SPARC systems can solve quite well at a scalable price.
  • Sun's rivals are going to falter in their transition to 64 bit computing.

    Sun's had its own fair share of trouble in recent years trying to get more performance out of its 64 bit servers. It seemed like every last drop had been squeezed out. But Sun had the advantage that they've been doing this 64 bit OS stuff since 1996. They don't have to solve every problem at once.

    Sun's rivals in the Wintel camp face the double whammy of trying to optimise everything at the same time with a newish 64 bit platform. It takes some time to optimise all those software tweaks and balances, and they're going to stumble and look pretty foolish while they do it. Some Intel server companies are not going to succeed, and will withdraw from the 64 bit race going back to safer proven 32 bit server solutions. That will just increase confidence in the company which has been doing it the longest. My guess is that Sun will introduce strategic 32 bit (external bus) SPARC appliance processors to help out with those parts where high megahertz does best. 2003 will be the long awaited year that SPARC servers leapfrog the competition again. Not all the solutions will come from Sun. Their partners will provide critical building blocks.
  • HP's transient problems in absorbing Compaq (which were blamed for their slowdown in business performance in 2002) will be called something different as they take on a veneer of permanence in 2003.

    Let's just call it "HP Stodge". Unlike HP Sauce (the #1 ketchup in the UK) which has a rich brown color, and is full of flavor and goodness, HP Stodge is something which is gray, sticky and makes your wheels spin more slowly.You can't run a company that size and which consists of business units which are mostly #2 or #3 in their respective niches and expect to get first class results. Integrating a company is no different to integrating a computer system. You need best of breed components to build a best of breed system. A lot of HP's business units are followers rather than leaders.
  • InfiniBand is a disruptive server technology and just what the company doctor prescribed.

    Sun's got a good track record of inventing, borrowing and running with new ideas in server I/O connection technology. In the past it did a good job with SCSI, then SBus (which gave Sun a lead of several years over PC makers until PCI came along to do the same job) and Fibre-channel. This year Sun will hype and race ahead with InfiniBand. Sun didn't invent it. But Sun stands to gain the most from promoting high performance servers at a low price, particularly if the low cost part is a 3rd party add-on and doesn't affect the profit margin in Sun's part of the System. Once the hype machine gets into play, you too will believe that an InfiniBand server from Sun will be a safer choice, and that you'll get it working faster than a similar server from everyone else.
Am I right?

Will we see a resurgence in Sun's fortunes in the year ahead? Just keep your browser tuned to our news pages and you'll see how well these story lines play out.
...Later - Sun reported a $2.3 billion loss for its quarter ending December 29, 2002. But I remain bullish. See below.

Sun Microsystems Reports Second Fiscal Quarter Results

SANTA CLARA, Calif. - January 16, 2003 - Sun Microsystems, Inc. (NASDAQ: SUNW) reported results today for its fiscal second quarter which ended December 29, 2002.

Revenues for the second quarter were $2.915 billion, a decline of 6% as compared with $3.108 billion for the second quarter of fiscal 2002. Total gross margin as a percent of revenues was 43.3%, an increase of 6.7% as compared with the second quarter of fiscal 2002. Net loss for the second quarter of fiscal 2003 was $2.283 billion or $.72 net loss per share.

Net loss for the second quarter includes a $2.125 billion expense related to the impairment of goodwill and other intangible assets. In addition, Sun recognized in the second quarter $357 million in expense related to previously announced restructuring actions. Excluding these items, as well as an in-process research and development expense of $4 million, losses on equity investments of $11 million and the related tax benefit of $204 million for all of these items, net income for the quarter was $10 million, slightly better than break-even on a per share basis. This compares with a net loss excluding special items of $99 million for the second quarter of fiscal 2002.

On a sequential basis, revenues for the second quarter of fiscal 2003 increased $168 million or six percent from the first quarter. Gross margin as a percent of revenue for the second quarter increased 2.1 percentage points from the overall gross margin percentage in the first quarter of fiscal 2003. Net loss for the second quarter increased $2.172 billion from the net loss of $111 million for the first quarter of fiscal 2003, primarily due to the impairment of intangible assets and restructuring charges. Net loss excluding special items improved $88 million from a net loss of $78 million to a net income of $10 million. ...Sun Microsystems profile

Editor's comments:-
although Sun's quarterly revenue takes it back to where it was in 1999, that's still a lot better than I expected in the darkest days of 2002 when I was worried that Sun was "sliding towards being a $10 Billion company." That's unlikely to happen anytime soon. And I think that, from now, on we may see some year on year revenue parity, or even growth.

Sun's huge $2 billion loss for the quarter looks scary. But this is a one off accounting adjustment. A lot of companies will have to make this kind of correction because of new accounting rules. The underlying reality is that with a 20% smaller headcount than its peak, Sun can still be profitable as a $12 billion a year company. I haven't changed my upbeat assessment of Sun's prospects for 2003.
.
SQL Slammer Web Virus Provides Strong Sales Pitch for Sun Servers

January 27, 2003 - there was a great advert today for Solaris caused by the shutdown of thousands of web sites worldwide due to the SQL Slammer virus which attacked Microsoft based servers.

Microsoft says that a patch for the SQL Server 2000 vulnerability was released as long ago as July 2002. Nevertheless millions of users have been unable to access web sites today because of this server based virus.

Is there a market for higher priced web hosting based on higher security infrastructure?

My guess is - yes. Maybe Sun should make more marketing capital out of this issue.

It's unlikely that other major Unix server vendors such as HP or IBM will use this incident to talk up the superiority of Unix derivatives over Microsoft servers. That would jeopardize their relationships with Microsoft.

If you were a marketing manager in Sun the SQL Slammer incident is just the kind of thing you'd dream about as a good pretext for going back to diehard Microsoft server shops and talking about the SPARC/Solaris proposition.
.
research would have come in useful here
Market research on
STORAGEsearch.com
Market research can help you avoid going down a dead end track.

click for more info

SPARCproductDIRectory.com
today's SPARC news SPARC computers SBus & PCI cards
SPARC manufacturers USASun/SPARC Resellers in the USA UKSun/SPARC Resellers in the UK

SPARC(R) is a registered trademark of SPARC International, Inc. SPARC PRODUCT DIRECTORY(SM) is a service mark of SPARC International, Inc used under license by ACSL. Products using the SPARC trademarks are based on an architecture developed by Sun Microsystems, Inc.