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What's the Matter With Sun?

It's been a tough year for Sun Microsystems — think of it as the perfect storm. With the company under siege, could it really be possible that Newt Gingrich has the solution?

Last November, people at Sun Microsystems — senior people — had to keep reminding themselves, again and again, that the company had more than $6 billion in the bank. Their mantra was, Everything will be fine. But when they looked around at everything that was happening at Sun, both inside and outside the company, it wasn't just bad: It was awful and very, very scary.

Count the ways. There was the telecommunications meltdown, with companies reorganizing under Chapter 11, being acquired, consolidating, or simply disappearing from the face of the corporate earth. There was the ongoing devastation of the dotcom collapse and its aftershocks. There was the just-like-that stoppage of corporate capital expenditures, which was most acutely felt in the information-technology category. And then there was September 11, which froze everything. All of those developments aligned to form a kind of perfect storm to punish Sun Microsystems.

You could also see it in the numbers. In the second quarter of 2000, which ended in December of that year, Sun earned more than $420 million. In the second quarter of 2001, which ended last December, Sun lost more than $430 million. What made it all the more difficult was that in the new environment, Sun was its own fiercest competitor.

Many of those melted-down telecoms and dotcoms ran on Sun servers, powered by Sun's UltraSparc chips. When those companies went belly-up, what followed were a thousand auctions of Sun servers, selling off at 15 to 20 cents on the dollar, sometimes less. Companies such as General Electric and Wells Fargo came in and snatched them up by the truckload. They were getting eight almost brand-new, high-end Sun servers for the price of a new one. And Sun was duty bound to honor those service contracts. What else, really, could they do?

To make matters worse, the competitive environment went from a kind of Cold War balance of power, with Microsoft and Intel on one side and Sun on the other, to a six-front unconventional war. Just like that. And a key component of the new form of conflict was price discipline: the ability to maintain premium prices for premium products. Sun was getting killed on price.

There was also the technology-advantage issue. As Boston Globe technology writer Hiawatha Bray wrote in an excellent assessment of the company's future prospects, Sun's servers are premium products because they are powered by Sun's UltraSparc chip, which "processes data 64 bits at a time, compared to the 32-bit Intel Pentium. That makes the Sun chip far better suited to working with large amounts of data in corporate databases or scientific supercomputing tasks."

Not anymore. Both Intel and Advanced Micro Devices have launched 64-bit chips, known as Itanium and Hammer, respectively. Both companies are selling those chips at a lower price point than that of the UltraSparc chip. And both companies are working with Microsoft and Red Hat engineers to develop chips that optimize the performance of Windows XP, Windows NT, and the Linux operating systems. Those chips will soon be available for servers made by Compaq, Dell, Hewlett-Packard, and IBM — all of which will greatly enhance the capabilities of Microsoft's .Net Web-services initiative and strengthen the hand of IBM's computer services. Microsoft's .Net competes directly with Sun ONE, which is Sun's own Web-services initiative. IBM's computer-services division has locked in as the industry standard. And we haven't even gotten to IBM's Regatta server, which offers a direct challenge to Sun at the high end of the server market. Add it all up (and here's the really bad news, although this isn't nearly all of it): Sun is a company under siege.

What to do? The first order of business at Sun is to stop doing stupid things. The stupidest thing that it does is to obsess about Microsoft. You can't have a cup of coffee with anyone in Sun's senior management group who won't, within five minutes, start whining about Microsoft this and Microsoft that.

Last March, Sun filed a massive lawsuit against Microsoft, which essentially piggybacked off the government's antitrust suit and which was largely instigated by the lobbying efforts of Sun and those in its orbit. It is a fact that Microsoft has been judged to be a monopolist. And its competitors complain that its corporate conduct is often ruthlessly and needlessly vicious.

But the antitrust case has reached its settlement, and corporate clients don't really care. They just want information technology to be interoperable, seamless, and less expensive. When they hear Sun complaining about Microsoft, and when they read about Sun suing Microsoft, the message they get is that Sun cares more about Microsoft than the business of improving information technology. Microsoft doesn't go into the offices of corporate America and whine about Linux or about any other tech company, such as IBM or Sun. Microsoft people talk about their products and the benefits they provide.

The second thing that Sun must do is to cease the stupid sloganeering. "We Are the Dot in Dotcom" was a disastrous corporate mantra — and not because the dotcoms blew up. It was self-serving and self-important. The key to any business is client focus. That is why Sun's previous slogan (before they went off on the "dot in the dotcom" tangent), "The Network Is the Computer," didn't work either. It wasn't client focused, and, even worse, it sounded like New Age drivel.

What should Sun be saying? The best line that I've heard so far came from, of all people, former House speaker Newt Gingrich. He was talking about large information-technology companies and what they need to say to their customers. Gingrich said, "The line should be, The Answer to Complexity Is (Your Company's Name Here)."

Complexity is what tears up virtually every large corporate, governmental, and institutional organization. They have all of this information technology that's not integrated. The machines don't talk to each other, and the wireless stuff isn't even plugged in. On and on it goes. The information-technology company that can fix that — that can harmonize all of the elements into a fully functional whole — will be the one that wins.

Sun could be that company. It has embraced open architecture, which is a huge strategic advantage. It is creating the platform, called JXTA, that will enable every device to talk to every other device across a fully distributed computing network, thus enabling a true peer-to-peer computing environment. In theory at least, a true peer-to-peer computing environment means that every last bit of CPU power can be used as needed and every bit of storage capability can be made available.

Because of Bill Joy, Sun's chief scientist, and the hundreds of Sun engineers and open-source code writers, JXTA is up and running. Of course, the selling of Sun's servers will go on, but that alone is not the future of the company. The future of the company is servers and code.

As it so happens, Sun is greatly needed by a very large and important client: the federal government. Most people would be stunned by the lack of compatibility and the absence of interoperability that exists within the federal government's information-technology systems. Before September 11, we could afford to view this situation as horribly inefficient but hardly critical. And the fact that the FBI computers couldn't talk to the CIA computers was reassuring in a kind of paranoid way.

But it was positively frightening that after September 11, Mohammed Atta got his visa from the INS in part because its computers were not compatible with the FBI's and the CIA's systems. Thanks to JXTA, that problem might be solved quickly and efficiently. Other companies can use Sun's technology to develop applications that could check every airline passenger and every credit-card transaction against terrorist watch lists and that could monitor every bad guy each time he makes a move.

Sun needs to fix a big problem for a big client in order to reestablish itself as the Toyota of information technology. The company is close to doing a deal with the federal government. It should focus all of its energies on that enterprise — and make us all safer as part of the deal. If it can do that, then all of those Sun-setting stories will disappear.

The truth is, in a distributed computing world, the computers are the network. And making sense of that — by answering that complexity — is Sun's real mission.

John Ellis ( is a writer and consultant based in New York.

A version of this article appeared in the June 2002 issue of Fast Company magazine.