Why Did Sun's Revenue Growth Hit a Brick Wall? - View from the Hill
On April 19, 2001 - Sun Microsystems, Inc., (NASDAQ: SUNW)
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.
That's one of the
worst revenue growth results that Sun has reported for years. I think there's
more to this than just the recession. Sun is losing focus.
|Zsolt Kerekes has been editor and publisher of the SPARC
Product Directory since 1992. Before that, he managed a number of Sun reseller
and oem organizations, and before Sun was born, in the early 1980's he founded a
venture capital backed startup in the factory automation market. Zsolt is also
editor of STORAGEsearch.|
As a Java developer, the applications I have been
developing and deploying over the last 6 months have resulted in the purchase of
3 Sun servers.
Without Java, I would probably be developing apps that
would not run on Sun servers, and even if they did, I doubt Sun would top the
list of choices. In fact, they would probably be Intel-based servers.
Java (and many of the other 'initiatives' Sun proposes) make their
servers quite useful. As you say yourself in the article, there is more going
on than Oracle and IPlanet.
Just my two cents :-)
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
But let's do a reality check here...
- 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.
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
Relationship Management) which eat up MIPS faster than any other business
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.
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.
- 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.
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