Analysis Sun Microsystems just had the most important product launch in its history, and the company didn't even tell you about the urgency of the event.
For two and a half hours, we sat through the Solaris 10 marketing barrage. CEO Scott McNealy and President Jonathan Schwartz showed up, a customer - FedEx - appeared, and a hired engineer fiddled with the operating system during the presentation to show off its new features. Sun, however, never brought up the fact that it may be a shriveled shell if this Solaris 10 x86 thing doesn't pay off - big time.
By most accounts, we're probably three years late with our Sun is dead story. You've all read how shattered the company is from a variety of news sources and heard that it's the next SGI from competitors - again and again. Sticking with Sun through the rough times has earned your reporter the dubious distinction of being a Sun apologist. Some people even prefer to exchange apologist with shill. Thanks for the letters.
To all of you who have complained, here's your Sun might be toast story.
The next SGI but with sales
If, in two years time, Sun does not have a vibrant, swollen, hungry Solaris x86 customer base, it will not be at all irrelevant, as some have charged, but rather uninteresting. It will be a bigger, richer version of SGI.
Sun has for many years garnered more than its fair share of attention and power for one reason and one reason only - Solaris. There are more Solaris customers on this planet than IBM, HP, Intel, Microsoft, and Dell care to remember. If HP came to you and said there are only three important operating systems on the planet - Windows, Linux and HP-UX - you would laugh. If IBM did the same with AIX, you would laugh again. When Sun pulls this trick with Solairs, the thesis flexes a bit of muscle.
Solaris is the first port for most of the major ISVs out there. It has helped keep large software makers such as BEA and Veritas alive. Think about it, as Schwartz would say.
Sun rode an impressive line of RISC servers to incredible heights and has created an awesome operating system franchise. Without this franchise, Sun is a pioneering research and development powerhouse, a fiscally well run firm and a solid server vendor, but not all that interesting of a company to cover. Solaris separates Sun from the herd, giving it reach and significance.
Sun's major objective over the next two years should be to extend the Solaris franchise to the x86 server market. Management obviously realizes this since they based most of the Solaris 10 launch on x86 strategies. But, we dare say, they didn't stress their point enough - something Sun is rarely accused of.
Sun's RISC server business is shrinking. Everyone's RISC server business is shrinking. The only high-end business that isn't shrinking is HP's Itanium store, and it's growing as fast as one of the Olsen twin's waist lines. Sun is pulling in between $1.5bn and $2.0bn in RISC server sales per quarter, and you can expect that to continue for years to come.
"We're an $11B company trying to become a $50B company," Schwartz writes on his glob.
The road to Interest
Well, the only way Sun will ever reach something near the $50bn level is if Solairs x86 takes off like a pair of Tenderloin junkies when the cops flash their lights.
It won't be enough for Sun to move loads of x86 boxes. Yes, the company will be tapping a new, large segment of the market and may well make millions in the process, but it won't really be on its way to $50bn unless Solaris x86 ships on almost every box.
Sun can move loads of Linux kit. It can move loads of gear that ends up running Windows. What, however, it really wants and needs is an Opteron sales army addicting the world to Solaris.
Sun must distinguish itself via Solaris from Dell, HP and IBM in the x86 space. The other companies all have other elements of their business to rely on be it sheer size, variety of kit, brand awareness or manufacturing prowess. Solaris makes Sun different.
There are reasons to believe Sun can pull this off. Its Solaris engineering team is arguably the best operating system design group on the planet. Sun pours billions into the operating system and has countless features that neither Windows or Linux can match. It's secure, scales incredibly well and now, Sun claims, fast. Beyond all of this, Sun faces no real Unix competition from a big player in the x86 market. It's Sun's segment to win.
Should Sun carve out a large chunk of the x86 market and have Solaris running on the systems, the rest of its business will likely thrive. Sun will sell more of its enterprise software - another growth area - and sell more storage. A thriving x86 business even legitimizes much of Sun's Linux desktop play, which opens another avenue for growth.
Sun has a lot of interesting RISC technology on the way such as its multicore processors, high-end file systems and virtualization technology. This will keep its current customer base happy and might even help Sun regain some lost ground in the high-end market. No matter how well this business performs though it will not carry Sun to the $50bn mark.
Sun's other bets such as making more money off of Java, thin clients and renting out computing power may pay off in the long run. They won't, however, pay off like a massive Solaris x86 server business. That's where the billions in upside are.
It's surprising that Sun didn't see this sooner. It made a huge mistake by backing away from Solaris x86 a couple of years back. It now has to win back the trust of customers and partners. This hasn't proved easy to do.
Should Sun's new line of Opteron servers take the market by storm and maintain a high Solaris x86 attach rate, reporters everywhere will be writing about the rebirth of the company. If not, Sun will need to look for another way to reinvent itself. It will still make plenty of money and have great talent, but it won't be as important without the Solaris x86 franchise.
"My guess is the adoption of Solaris 10 will be the fastest in the history of Sun (for a new rev of Solaris)," Schwartz said.
"We've made a lot of big bets over the years, and they have worked out and paid off quite well," McNealy said.
Here's hoping. ®