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The Loon rides again with attack on Sun's comic value
McNealy is no Letterman
A Sun Microsystems conference would not be complete without the witty musings of Merrill Lynch analyst Steve Milunovich.
Milunovich's reputation as "The Loon" precedes him. This is the man that backed research and development with unparalleled vigor during the dot-com boom only to turn his back on technology development a stock market crash later. And now Miloonovich has applied his razor sharp wit to Sun's new Java Enterprise System.
Here's his first take on the product.
"Sun's push into software could be disruptive to IBM and Microsoft's enterprise software businesses. By pricing its desktop and server suites at $50 and $100 per employee per year, up to 75 percent cheaper than competitive offerings, Sun could cause enterprises to reconsider their purchases."
This is classic Loon. The analyst has a particular knack for pointing out the obvious. He excels at it.
Miloonovich has a duty to keep things simple for his customers. We understand this. It makes sense to give the basic details of Sun's move and put them in context. His context, however, is rather underwhelming. But we are here to help.
Sun's new pricing scheme has the potential to affect a whole host of companies. IBM and Microsoft do head the list, but HP, Dell, Veritas and BEA may feel some heat as well.
Neither HP or Dell has a homegrown middleware stack. This means they are forced to turn to partners such as Microsoft and BEA for the code customers need. If Sun falls flat on its face with the Java Enterprise System, then neither HP nor Dell has a worry. If, however, the plan succeeds, then HP and Dell will both be at Microsoft, BEA or (insert ISV here)'s mercy. HP and Dell need to pray that software makers adjust their prices at speed.
Keep in mind that it took Sun about a year to figure out the pricing model for the Java Enterprise System. Sun had to look at how the price change would affect its bottom line, how to integrate the products, how to train employees to sell the package and how to explain it.
We can't stress enough that Sun must show success with the Java Enterprise System to be taken seriously. It has tried to undermine the app server makers before by bundling its product with Solaris. This did not work well. For the Java System pricing model to have major impact, Sun needs to get some wins this time. But now we sound like The Loon.
Still, the pricing model could well be considered one of those mystical inflection points whether Sun succeeds or fails. The company has pushed the vast majority of "a system's" value onto the hardware part of the purchase. At $100 per employee, the software stack is just along for the ride.
Jonathan Schwartz, executive vice president at Sun, tells us that 90 customers have already requested a quote for the Java Enterprise System. 30 of these requests came from non-Sun customers. It's in this requests alone that hardware and software makers will feel pressure from Sun.
The customers will look at Sun's model and then return this bid to Microsoft or whomever. Sun's new pricing method will require a response and with that should come some change.
Some of these finer points seem to elude Miloonovich. All he could come up with is the following:
"Sun's EVP of software, Jonathan Schwartz, introduced two of its seven new software products-Sun Java Desktop (Mad Hatter) and Sun Java Enterprise (Orion). We believe the other five systems will be for mobility, smart cards, developers, operators, and possibly cell phones."
Miloonovich uses the word "believe" here to indicate his ability as a prognosticator. The funny thing is that Sun, in fact, told the audience that the other systems would most certainly be for mobility, smart cards, developers and operators. The "possibly cell phones" bit would seem to fall under mobility already. It's not clear how Merrill was confused there.
We're not sure how much Stevo is paid, but we think he should be encouraged to pay closer attention. The missing fifth piece of the puzzle that Sun actually pointed to was a purple plug depicted at the back of a slide describing the Java System stack. Sun execs said they will tell us more about the plug later, but we suspect it may have to do with utility style pricing models and the like.
Miloonovich may have missed these little details because he did not actually attend the show or because he grew misty while thinking of Dell's supply chain. We didn't see any analysts here in catholic school girl outfits, so we are pretty sure he did not make it to Sun Network. (As a quick aside, isn't amusing that The Loon loathes R&D but covers nanotechnology for Merrill.)
Miloonovich did, however, manage to catch parts of the Sun Network Web cast, as evidenced by his closing research note remarks.
"Sun still faces an uphill battle with its against-the-grain strategy of Solaris on Intel and Linux on the desktop. Our surveys indicate gradually eroding customer support. Even CEO McNealy's Top Ten list didn't get the laughs it used to."
Stevo, of course, doesn't know what it's like to get laughs, but we think the bit about the top ten list is actually his most valuable insight. McNealy's writers have really started to slack. The Oracle World list was abominable, and the Sun Network comic relief wasn't much better.
We have no idea what bearing McNealy's unfunny top ten lists have on the company's performance, but if The Loon points it out, it must be important. In keeping with this theme, we challenge Merrill to kick off a new McNealy laughter quotient/customer loyalty/market share survey so we can really gain a firm idea about Sun's future.
Scott, please, try to keep Sun alive. Be more funny. ®