Schwartz To Try Raising Sun

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Schwartz To Try Raising Sun

By: David Utter
2006-04-27

Now that long-time CEO Scott McNealy has finally yielded the big chair to Jonathan Schwartz, opinions are decidedly mixed on the company's future.

Schwartz To Try Raising Sun

Wall Street sentiments toward McNealy and Sun Microsystems (SUNW) have been at a low point for some time. Investors wanted McNealy to perform the mass layoffs other firms made in the wake of the dot-com crash and slash costs as far as possible.

McNealy was notoriously resistant to those suggestions, and that may be why Sun languishes at 5.02 per share while other Intel and HP have come back strong. Now that McNealy has stepped down, president Jonathan Schwartz moves into the CEO role for Sun. He seems equally reluctant to take an axe to headcount anytime soon, either.

Schwartz may not have a choice but to take some drastic action. Sun's third quarter financials were not just a kernel dump, but a meltdown; their net loss for the period hit $217 million, mostly related to acquisitions of StorageTek, See Beyond, and other firms. McNealy stepped down immediately after Sun announced its numbers.

Sun gives away much of its software these days, a stark contrast to a time when it sold the Solaris operating system to willing enterprise buyers. Linus Torvalds, the creator of Linux, provided a software fulcrum to the open source world; companies like Red Hat eagerly grabbed levers and toppled high priced hardware purchases from corporate budgets everywhere.

Demand for Sun's well-engineered hardware may be picking back up, though. Google disclosed last year it would buy more servers from the company; that may be related to Google's Desktop Search product, which offers a version aimed at enterprises. Google could tout the Sun name as a selling point for that service or even ones they haven't released yet.

One of the final acts of McNealy's career came through an open letter he wrote, addressed to Hewlett-Packard (HPQ) CEO Mark Hurd. McNealy suggested HP and Sun merge the older HP-UX proprietary operating system with Solaris 10. Hurd and HP let that pass without comment.

HP's numbers look pretty good these days, and its latest market close of 32.80 is close to the company's 52-week high. They recently announced a deal with MySQL AB to distribute its database system as part of HP's Open Source Middleware Stacks. Those offer a complete middleware platform to businesses.

The gains HP has made in the global PC market as part of its resurgence have come at the expense of market leader Dell (DELL). An IDC report showed HP's growth in the PC market more than doubled percentage-wise that of Dell in the first quarter.

Dell's movement toward targeting the high-end gaming computer market does look like a good move at the moment. It took the company only three days to sell out of the XPS 600 Renegade systems, priced around $10,000 each. Dell did not reveal how many of those pricey machines were purchased.

But the company does have high hopes for the gaming market. In the previous quarter, Dell acquired Alienware, a company known for its custom high-end gaming PCs. Although the volume of units sold is much lower than typical PCs, they do command higher margins for their premium equipment, and apparently no lack of customers.

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Tags: Sun, HP, Dell

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About the Author:
David Utter is a staff writer for InternetFinancialNews and WebProNews covering technology and business.


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