Shine out fair Sun

Once a darling of the dot.com boom, Sun's fortunes have waned in recent years - but new initiatives seem to be putting the firm back in the game. Michele Howe reports from Sun's California HQ on the vendor's plans for recovery.

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By  Michele Howe Published  August 25, 2007

It would be fair to say that Sun has had its share of troubles over the past few years.

As has been much documented, the server technology provider was one of the big successes of the Silicon Valley in the 1990s, with soaring sales and strong profits, but it came unstuck after the dotcom crash in 2001 subsequently experiencing falling sales and a run of losses.

Now, however, it looks as if the fortunes of the world's third largest server manufacturer are turning around. In January, Sun pleased investors by reporting net GAAP profit of US$126 million for the second quarter of 2006. Shortly after, US private equity firm Kohlberg Kravis Roberts said it would invest $700 million in the company.

It remains to be seen if the firm, which is noted for developing the programming language Java and for being a supporter of open source software, will make its target of achieving operating profit of at least 4% in its fourth quarter of 2007 - results are due out at the end of this month - but so far it would seem Sun is back on track.

Much of the credit for the turnaround has been given to Jonathan Schwartz, the 41-year old pony-tailed president and CEO of Sun who took over from co-founder and current chairman of the board Scott McNealy last year.

One of the major changes Schwartz made was to slash up to 5,000 jobs, equivalent to around 13% of Sun's workforce, shortly after starting, a move analysts saw as long-overdue. Another key from Schwartz during his first year was to open Java's source, making Sun the biggest contributor to the open-source community.

Schwartz believes that the company's growth will be driven by encouraging widespread adoption of the internet, which in turn will lead to a greater demand for the infrastructure Sun supplies.

When I show up it doesn’t actually do a lot for developer adoption; it does a lot for the press but it’s a flash in the pan.

His focus, he told EMEA journalists at a recent press briefing at Sun's Menlo Park headquarters in Silicon Valley, is in connecting with the software developer community.

"We have two core markets we care about: developers in the market place, and customers who view IT as a weapon who will be buying the servers and storage and services and software that we build," he said.

Reaching out to the developer community is a big part of how Sun is looking to strengthen its position in the Middle East.

Asked why he hasn't visited the region, the CEO replied: "When I show up it doesn't actually do a lot for developer adoption; it does a lot for the press but it's a flash in the pan and I'm much more interested in how we get the next wave of students to know our technology so that it creates economic opportunity."

Another means by which Schwartz aims to communicate with a wider audience is through blogging. On a good day, Schwartz says that his company-based blog attracts up to 60,000 hits.

Nearly 40% of Sun's roughly $13 billion annual revenue comes from the United States, but the company sees the bulk of its growth coming from international markets.

Timeline: key Sun events

1982 Sun founded with four employees

1987 Sun and AT&T form an alliance

1988 Sun reaches US$1 billion in revenue

1991 Sun unveils Solaris 2 O/S

1993 One million systems shipped

1995 Sun develops Java

2003 Sun partners with AMD

2005 Sun becomes largest commercial open source contributor with 1600 patents

2006 Jonathan Schwartz named CEO


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