Merrill Lynch Rips Sun 428
cosjef writes "In an open letter to Sun, an analyst for Merrill Lynch tells Sun to change or risk adding itself to the junkyard of formerly-great technology companies like DEC or Data General. The letter even recommends taking the helm away from McNealy, whose 'brash and contrarian personality have been synonymous with the company's image and success. Unfortunately, the act is getting old.' Sun's mistakes are well documented, but the biggest one is believing that what made them successful in the past would make them successful in the future."
Open Office / Star Office (Score:3, Interesting)
Open plea to Sun! (Score:1, Interesting)
Do it before you get bought out.
They'll never do it, after all
Merrill Lynch == crap (Score:4, Interesting)
As a former quantative analyst, I can say this about the larger brokerage houses. They have an agenda. If they can generate enough hype (up or down) about a company, true or not, they wind up right, because the uneducated/ignorant masses follow their "leads" like lemmings. It's a simple business from ML's perspective. If you build it (the hype) the will come.
sun + novell + apple (Score:3, Interesting)
- sun for their server kit
- novell for their networking
- apple for desktops
- os would be jointly developed using the fantastic ximian guys, the OSX team and the JAVA boys.
Don't trust share prices or firms as an oracle. (Score:3, Interesting)
And it's good to look at the fact that it only reflects the beliefs of people who are geed-aware enough to trade shares. Most of these people are usually uninformed enough about reality as to trust the firm-provided analysts when they say things like that SCO's IP-blackmail business plan will be a complete boom.
See SCO's trades rising? That has nothing to do with reality, as anyone who recognize the nonsense in the phrase "I own UNIX" can tell.
Several financial firms seem to have already spoken about the "critical" and "wrong" situation of Sun Microsystems and exactly which percentage of layoffs they shall apply. Maybe they're right, but, as usual with analysts and their habit to work on none or little real information, I'd say they guess, as they do most of the time.
That is, if they're not actually trying to trigger some share-price-waves for their own benefit.
Personality leaks in the company may be a better indicator to use, and the fact that their upper layers are trying to ignore the Free Software/Open Source phenomenon (just like Microsoft did before; they no longer do; they now have a "Linux Chief" for a "Linux Strategy" consisting on destroying Linux) shows they have the same short sight that Microsoft did. However Microsoft has a lot of money from their dominant business, that buys them some time to try to react, whereas Sun may have not so much time left.
Will they want to see the lion running on them for a meal? I hope they'll do. But pretending to see the future would be behaving like all those financial analysts.
But if they go down in the end, I only hope Java gets open-sourced, rather than it getting bought by Microsoft in order to shut down the technology.
Merrill Lynch owns $1.1Bn Microsoft shares (Score:5, Interesting)
see here [theregister.co.uk] for some detail of "the loon" as The Register call him.
Steve Milunovich, advice for Sun (Score:5, Interesting)
One of the advantages of reading Steve was that he did his own surveys of Fortune 100 (500?) CIOs, asking about budgets (ie future system vendor revenues) and various topics of the day (ERP deployments, etc). So I found his comments that Sun should make contrarian bets but "do so in ways palatable to conservative CIOs" interesting. Steve may have some unique insight into that.
What's a little odd to me about Steve's advice is the contradictions in it. At least based on the admittedly summary article linked here. On the one hand, he seems to advocate a "batten-down-the-hatches"-type strategy: cut R&D, dump SPARC (eventually), don't make waves, be more Linux friendly. And on the other hand he seems to say "make contrarian bets". It may be that Sun is just doomed due to volume economics (although in fairness, they have always been *way* more focused on that than every other Unix vendor in my past discussions with management I met in my past life), but the "batten-down-the-hatches" strategy seems more likely, not less likely to lead them down the "DEC, Data General, Compaq" path. Sure Sun needs to be shrewd and somewhat conservative in cutting excess spending. Maybe that *is* what they need to do to stabilize their stock a bit. But that isn't how they're going to avoid the 'computing graveyard'.
Although if you are doomed to the computing graveyard (something I thought was true of Sun in 1995 but Sun did stunningly well the following five years), it is true that the most prudent thing to do is spend your remaining strength as conservatively as possible. I don't have any easy answers myself for Sun. I can't fault Milunovich for trying, but the advice doesn't look particularly helpful to me.
--LP
Re:Sun will be fine (Score:5, Interesting)
For now. At "for now" is a very, very short time. Sun simply doesn't have the technology resources and financial wherewithal to make SPARC a mainstream, widely supported processor that is able to stay ahead of a rapidly accelerating market. IBM, AMD, and Intel are all shipping 64 bit chip sets and most of the hardware configurations being built around them will far outpace a comparably priced Sun box without busting a sweat.
Sun continues to rest on its laurels as the "premiere" platform for academic and scientific applications. Unfortunately, the market has long since overcome that fallacy and Sun will never recapture the high end workstation market for the simple reason that it no longer exists. Even moderately priced desktop boxes outperform Sun's best engineering workstations from just a year or two ago. So other than the ego boost ascribed to an academician with a Sun box on his desk, it's hard to argue there is any value in selecting that workstation option at this point. Sure, there are legacy software issues with stuff written to proprietary Sun graphics or clustering APIs, but that stuff all has non-proprietary solutions now that make porting quite easy.
Sun's only other market, high performance Internet servers, evaporated with the DotCom bubble. They're stuck holding a fist full of defaulted loans, cancelled leases, and warehouses of repossessed server boxes in the wake of that carnage. Nobody's interested in going that route again.
Seriously. If you want to spend $5000, $8000, or even $75,000 on a computer, you can go to Dell. But, if you're looking to drop $1.3 million on a computer, you go to Sun.
Now there's a brilliant reason to purchase a computer -- that it costs $1.3 million. Odds are likely 100% that you can purchase a superior system from a non-Sun manufacturer for an order of magnitude less now. You basically make Merrill's case for why Sun will be dead in 2 years. The pool of idiots willing to plunk down $1M for a box to serve web pages dried up 2 years ago. Look at how people do it now (i.e., Google, Yahoo, etc.) -- racks and racks of cheap, redundant commodity servers. Where's Sun's answer to that?
Bye, Sun!
"They are dead Jim.." (Re:Sun will be fine) (Score:5, Interesting)
We competed with Sun. We found that the Sun machines could not hold a candle to the SGI (or IBM hardware, and occasionally the HP hardware when they got their heads out of their asses every few years). It was well known by our customers, and often repeated to us as a reason to bring us in, that Sun gear was simply not fast. It was quite hard to justify spending hundreds of thousands of dollars on gear when VPs desktops often were able to run some of the benchmark tests in similar time to the Sun gear.
Sun machines are not fast. They are quite slow. Solaris is not a paragon of stability. One of our customers pointed out their charts of availability to us. One of the most available machines was a PowerChallenge box I had set up in their computing center. Had been up and functioning under heavy load for something approaching 2 years, without an unplanned shutdown. One of the least available machines was the Cray SuperDragon^H^H^H^H^H^H^H^H^H^H^H^H^H Sun Starfire machine which was not able to stay up long enough to complete the benchmark acceptance suite. Many of our other customers noted this as well.
SGI is now a small fraction of its former self. It abandoned the Beast and Alien (2 amazing CPUs, due in 1999 and 2001 respectively), courtesy of Forest Basket and his inept reasoning, and went whole hog for Itanic. Some of us warned the company that this would be the undoing of the company. We were ignored. We were also right. Management had assured us that Itanic would take off, and be the next big thing. Yeah. Right. It appears now that the next big thing is Opteron. Too bad they bet the company on Itanic.
Sun has some similar choices ahead, though its technology is not really all that good. Some things are of interest, like the "java" desktop, which sounds like an S/ID card with a server and remote thin clients. Neat, but requires some serious networking infrastructure. Also, java aspect is irrelevant.
Java itself as a technology is a solution in search of a problem. Yeah, it is everywhere. Should it be? Is it really the correct solution to most of the problems? No, not by a long shot. The more I see it deployed, the larger the sale of a bridge I see... It is a language seeking to become an operating environment/system, targetting windows and everything else. It is supposed to be write once run anywhere, but the reality is "write 3 or 4 times and debug everywhere, and then grouse about how slow it is, while rabidly defending the decision, which you are questioning yourself, to use it for such a mission critical application".
Sun has some rather serious challenges ahead. Its hardware simply sucks rocks. Its software ain't all that good. Java is the jack of all trades, master of none.
Time for re-invention. Split out the SPARC, replace it with Opteron. Ditch lots of the software. Spin out Java. Give it a fighting chance to morph into something useful and find a real direction on its own. Sell off or close down the rest.
With McNealy at the helm, this will never happen.
Re:Bah (Score:5, Interesting)
"The Dell strategy, though, includes keeping R&D to a minimum--something foreign to Sun. Says Joy: "All along, Scott [McNealy, Sun's CEO] has maintained R&D spending, so there is some promising new technology coming too.""
Not cutting expenses while revenue going down = low or negative net income = stocks going downhill. Microsoft isn't in better shape than Sun due to their superior R&D, it's because of their superior marketing.
Re:Sun did themselves in (Score:3, Interesting)
I may very well have a cure for AIDS and cancer, but unless I market the cure, no one will know about the product to buy it.
ML may have an agenda, but. . . (Score:3, Interesting)
Earnings Per Share (ttm): -0.75
Profitability
Profit Margin (ttm): -29.99%
Operating Margin (ttm): -23.82%
Management Effectiveness
Return on Assets (ttm): -23.85%
Return on Equity (ttm): -42.61%
2) Consider the competition. NUMA, RCU, and JFS, for Linux just came out within the last year. Also within the last year: 64-bit processors from AMD, Intel, and Mototola. The competition is catching up fast, and not just on the low end.
Re:Sun did themselves in (Score:4, Interesting)
5% of win2003 having been Linux is not a big deal(far less than 1% of installed Linux). Had it been 5% of Linux, well, that would have been a huge deal.
Re:I don't understand why people trust analysts (Score:1, Interesting)
Re:Merrill Lynch owns $1.1Bn Microsoft shares (Score:5, Interesting)
Yes I was considering the first half of the letter to be pretty much spot-on, then I got to the phase-out of SPARC and I knew that he was out of his mind. When will companies learn that the only way to compete in today's market is to NOT dump your crown jewels of technology in favor of an AOL'er me too on Intel. It's the #1 way to KILL your company. Carly's already started it with HP, and she's killed their processor arch, Compaq (nee DEC)'s, Tandem's, etc. And she's fired lots of people, bought two planes (with plans for 3 more), and continues to churn out sh*ty PC's... Their entire product line has taken on a relatively cheap look... enough about HP, though... the point is Sun really needs to do a few things to turn around. (Most likely... i.e. success is still dependent on a lot of unpredictable things)
1. Consolidate and simplify their software product lines... middleware etc. But put lots of R&D on the most efficient and useful products
2. Place lots of R&D on SPARC... it needs to be competitive with POWER... so they need to catch up a bit. It needs to break 1.5-2Ghz (but still be the elegant architecture it is... no corner-cutting)
3. Slash all server margins... especially in the high end... still keep them large enough to cover R&D and modest profit... but none of this milk you dry kind of pricing. Offer special deals on bundles of servers that are extremely compelling.
4. Keep up the Mad-Hatter stuff and treat Linux and the OSS community better... a little closer to Apple would be appreciated... none of this posturing towards other companies like IBM about how we are immune to SCO etc.
5. Simplify and possibly divest some of their x86 stuff. They really haven't done so well with Cobalt HW. I'd love to see Cobalt HW return to MIPS... especially if they can do some really awesome stuff on an embedded scale...i.e.
How would you like an ultra-silent, fanless rack of 42 servers that uses less juice than your desktop PC yet outperforms it by a factor of 10 and has no moving parts to break (Flash disks). A partnership with SGI would help... but SGI would also have to ditch the "milk the cash cow" mentality. Something that would allow cross-licensing and development of a PowerPC analog to R16K and beyond. Or they could just use PPC... it's a great option and cheaper in volume than the equivalent x86 on embedded scales.
I do like their new Java enterprise pricing thing... I think it will help a lot, but without some nice whizbang competitive hardware, it doesn't have full impact. It's time to see US IV in widespread use and US V and VI on the way.
Re:Sun is just following SGI down the tubes (Score:3, Interesting)
Itanium *does* (finally, at this point, six years or so late) beat most of the 64 bit big-iron competition.
However, what it does *not* beat is Opteron, which is about as fast (faster on int, slower on fp), much less expensive, runs your legacy software well, and uses less memory and power. BTW, before you amplify on your chestnut above, Opteron is not "shortcutting to 32 bit mode" to get it's SPEC results.
In short, Itanium is in the same position as Sun - a dinosaur that's too big and slow to adapt. The Opteron mammals are about to take over. (Yes, it's ironic that the "mammals" are running the venerable x86 ISA.)
It also has lock-stepping, which is important for computation checking for true high availability systems (think Himalaya systems), few architectures have that.
And only 1/10 of 1% of customers want it...how much do you think this will help Itanic? There are also other routes to high availability/reliability.
Did you know AMD has already sold more Opterons than Intel has Itaniums? Itanium has been around much longer.
It _is_ expensive and hot though, and that is what really sucks.
It is expensive and hot due to it's enormous die size. A big part of that is an enormous on-chip cache (6 MB) which is necessary due to EPIC's poor code density.
(BTW all my positive comments regarding the Opteron pretty much apply to the G5 as well, another true 64-bit chip. It looks like the Opteron is a little faster (though I'd like to see more benchmarking with better compilers), but the G5 has Altivec, which provides FP functionality to rival the Itanium. IBM has a strong background in scientific computing.)
Who listens to analysts anyways? (Score:1, Interesting)
We'd have NO technology breakthroughs if companys paid any heed to what some wall street hedger whines about.
I'd expect Sun will have some choice words for the analyst soon!
The ONLY opinions that matter are that of shareholders and customers. If they are OK with the path then a company is doing the right thing.
Sun has been in business for 20+ years and has Billions more in CASH than most businesses have in PAPER worth.
One of the reasons Sun has the customers they have is that they approach problems in a different way than any other large SYSTEMS company. I don't think the need for different approaches will change.
What other company has the GUTS to even suggest the recent pricing model Sun roled out? Once again Sun is pointing customers in a new and interesting direction.
PC/Microsoft industry puppets and rabid Linux fans just don't get the reasons customers choose Sun over others and I doubt they ever will.
Re:Sun will be fine (Score:1, Interesting)
Who uses these machines? Well, where I am we have in excess of 500 Sparc CPUs across a variety of machines (15K -> 280) in production. We have a boat load more in development.
What do we do with them? Yes, there are lots of very large databases. There are also lots of very large enterprise applications (e.g. cc processing) that need to be arbitrarly scalable. Pretty much all of the infrastructure is on Sun, because in comparison to developing support for multiple platforms, the cost of hardware is trivial.
An example of why people drop $1+ million on these machines: we recently ran out of headroom processing payments. We take millions of payments per day, and a physical box swap in the cluster would have been very hard. Thankfully we ran with a 15K. Our upgrade was the on-line addition of 2 CPU boards, allocation of those boards to a domain, et voila, we had 48 CPUs, not 40. Job done, no downtime, no cable swapping. In comparison to taking an outage on this system...buying a 15K is very cheap.
Saying a 16 CPU Xeon is just as good as a 72 CPU Sun is a similar argument to saying "why buy EMC, I can put 1 Tb in my PC for $1000?". You are paying for resilience, scalability and suppport, not necessarily for outright speed.
So could windows be an alternative at this level? Well, after the recent virus disasters, we are stripping Wintel out of anything mission critical. One day we will be nailed by a virus, and we don't want to take that risk. What about Linux? In a few years, when it has demonstrated these levels of scalability, maybe. However enterprise application support (apart from Ops Arch) is very poor - all of them are saying they'll do a Linux port, but none are ready (apart from Oracle that is...)
IBM buys Sun? (Score:1, Interesting)
Re:While Sunss marketing improved they still rock (Score:3, Interesting)
I differ on this perspective. Whether it was a good move or a bad move for Sun to structure their company to a thin client system, I respect the initative for them to "pratice what they preach". They have a vision that thin clients are the way to go. To a certain degree, I completely agree with them. What I find great is that they actually use the technology that they're trying to sell. Not many companies do this and I find it a lack of faith in their own products. For example, I've done a tour of duty at Xerox and I was completely amazed at how many HP printers ran the office environments. I was in the systems testing lab, and although HP was beating up Xerox in the market, I can tell you that under the hood the Xerox printers had a much better engine. Yet, when it came to running their company, they supported their competition. Yeah, look at them now...hmmm.
Anyway, good or bad on Sun's decision. I completely respect their decision to use their OWN technology to run their company. That alone makes me want to buy their product. It's companies like IBM that (at the time) were pushing OS/2 and running Windows instead that just make me sick. Again, at the time, OS/2 was completely superior to Windows, yet they didn't even use it themselves. No wonder it (OS/2) died.
You say they need to run the competition product in order to know what their competition is...that's what testing labs are for! A better test is to actually USE your product/technology to PROVE it's usefulness. If you can't do that, then face it...the product is crap and by not using it is telling your customers just what you think of it. Remember the controversy a while back about Microsoft using FreeBSD to power their web sites? As much as I hate Microsoft, it was a damn good thing they made the rapid switch to start using their own product. In all, I dislike Scott for his over-focused smear campain against Microsoft, but I think he definitely made the right decision to structure the company to USE their vision of the future.
What Sun does well (Score:2, Interesting)
And this is where Sun *still* shines. We've run benchmarks on multi-CPU x86 boxes up through the latest Xeons and we're underwhelmed to say the least. Unfortunately, the code we run is optimized for the P3 architecture and just doesn't run that well on P4. Also, the memory architecture sucks compared to Sun; a second job running on one of those Xeon systems brings the performance of the first job WAY down (not due to CPU switching; we used a special kernel that eliminated most of that). This does NOT happen on our 4-year old Sun systems. Itanium systems are insane expensive (more than an equivalent Sun system these days) and Opteron is just becoming available from tier-1 OEMs. We'll look at the Opteron as soon as we can get our paws on one, believe me.
And if you're talking large memory footprints, Sun is just about the only way to go for our applications. We just bought a new Sun system for our high-end jobs that need gigs of memory. The old 4500s are still working but they're a bit slow.
Our future is bound to include Sun for the forseeable future, but the Opteron systems may reduce how many Sun systems we buy in the future. If Sun could make a profit on such a reduced volume (high-end servers instead of desktops, mid-range and high-end servers together) it would be great. But it's hard to be in a low-volume business and maintain profits; I suspect they won't survive in their current incarnation.
My main point (you didn't know I had one, did you?) is that there are some things that Sun does *very* well and they have no real peer. Oh, you can talk about IBM or HP, but will my EDA applications run there? Nope, so it's a moot point. The installed based gives Sun the edge there, even if their system architecture could be shown to be lacking with respect to those vendors.
I hope StarOffice gives them a leg up on the desktop, be it on Sun hardware or otherwise. It's a solid product; just wish they had brought it out a couple of years ago in its present form.
- Leo
SPARC64-V Buys Time For Sun: It's Critical Now (Score:1, Interesting)
If that is the biggest mistake, then the second biggest mistake is the processor-design team. According to "Sun's processor plans slip a notch [com.com]", the schedule of the UltraSPARC processors has slipped again. The processor-design team has 2 characteristics: chronically behind schedule and chronically behind the performance curve. Right now, the UltraSPARC III is being crushed, performance-wise, by the Power4+ and the SPARC64-V, according to SPEC [spec.org]".
Yet, McNealy stubbornly clings to the UltraSPARC III. If he knew how to run Sun, he would immediately scrap the UltraSPARC III and successors and tell his server team to use the SPARC64-V. He could come out with an E15K that just barely competes against the p690 in about 2 months. The SPARC64-V is instruction-set compatiable with the UltraSPARC III and vastly outperforms it, and modifying the E15K and other Sun servers to use the SPARC64-V is a simple matter.
Time is extremely critical. Sun itself claims that it will lose about 10 cents per share for the first quarter. 10 cents per share means a loss of about $300 million. Extrapolating to the full fiscal year means a loss of about $1.2 billion. In order to compensate for that loss, Sun will need to fire about 6000 employees.
The only conceivable reason that McNealy refuses to abandon the UltraSPARC III is that he fervently supports a workforce weighted in favor of H-1B workers. Sun has many H-1B employees, and they built the UltraSPARC III. By contrast, Fujitsu uses native workers [nec.com] (i.e. Japanese citizens), and they built the SPARC64-V. (IBM also prefers American citizens or permanent residents, and they built the Power4).
McNealy better put aside his ego and go with the SPARC64-V. It is the fastest, safest route to boosting Sun's fortunes. In the future, he should consider giving preference to American workers, not H-1B workers. There is no evidence to suggest that H-1B workers are better than American ones; indeed, H-1B workers might actually be destroying Sun as evidenced by the horribly designed UltraSPARC III.
Most importantly, the SPARC64-V will buy time for McNealy. Maybe 1 year or 2 years of breathing room. Then, he can make the hard decision of spinning off the processor-development group and transforming Sun into a niche player that focuses on two areas: software applications and highend-servers that use Fujitsu processors (or, gasp, IBM processors) designed by native talent. Other possibilities have been thoughtfully outlined by Merrill Lynch, the premier American investment company.
SPARC is a better 64 bit platform than opteron (Score:3, Interesting)
SPARC has no such need for backward compatability. SPARC runs solaris apps, all of which are 64 bit native. They can optimize for it with out have to have a parallel instruction path for 32 bit apps. There are years of upon years of scientist time dedicated to optimizing the SPARC chip, and tuning the Solaris code to make the most of it.
Saying that Sun should abandon SPARC for Opteron hides a fundamental difference between these two processors.
Re:While Sunss marketing improved they still rock (Score:3, Interesting)
Granted, they do better in TPC-H, but that's understandable when there is only 4 other system submitted for the category.
All numbers from http://www.tpc.org