Has Sun Microsystems hitched a ride on the Linux bandwagon? According to a flurry of press announcements last week, it sure looks like it. However, there remain a lot of
business observers who are still trying to decide if the company really means
it. Others are still undecided if Sun and Linux are a good business
combination. What do you think?
In a series of announcements, press releases and calls to analysts
in the United States and Asia last week, Sun officials said the company was making a full-throated commitment to the Linux platform. At least that is what it sounded
like, at first. Sun President Ed Zander said the company would become
far more involved in the Open Source development community. Sun would be
shipping its own, Sun-centric Linux distro and port its Sun Open Network Environment
software to Linux. The company announced it would expand its array of
lower-end servers by extending its Cobalt platform and developing cheap
Linux-on-Intel based servers. It also announced that it would support
Linux on its StorEdge line of enterprise storage devices and get serious
about developing a Linux-oriented services business.
It sounded good. A number of analysts said that Sun was making an
overdue change in the right direction. They suggested that Sun's embrace of
Linux, along side that of IBM and HP -- and possibly AOL -- was another sign that
the ABM Coalition (Anybody But Microsoft) was continuing to consolidate
around the Linux codebase as a common platform. Jay Stevens of Buckingham
Research upgraded the stock and predicted the stock price would return
to the $20 mark within a year. Merrill Lynch's analysts were more
cautious, but they upgraded the stock as well.
None of these announcements did much to buoy the price of the company's stock, which has been spiraling downward
for months as investors speculated about the impact of Open Source on
proprietary Unix vendors.
Many observers suggested that that there was less here than met the eye. Many elements of the Sun ONE software environment had been ported to Linux some time ago. The company recently announced that
would be ported to Linux. . The company had all but committed to Gnome as the default desktop interface as
far back as August 2000. Sun already contributes to Open Source
projects such as Mozilla, OpenOffice, Gnome and Apache. Further,
Sun's newly announced Linux compatibility assurance tool, called
LinCAT, looked a lot like another toolset Sun had previously announced,
allegedly to help Linux developers port their apps to Solaris.
The problem for Sun is that many of its customers have been going in
the Linux direction, as the Open Source operating system has continued to eat away at the market share and profits of proprietary Unix developers. This is the primary reason
the company's stock has gone into the tank over the last six months.
Does Sun really intend to migrate its business over to an Open
environment? And, if it does, could the company make any money at it? There's a lot
of doubters out there.
One observer doubted Sun's ability to fully embrace any platform it
could not control. Sun's history with open platforms has been mixed
at best. Sun's Java development program had allowed for user
participation, but ultimate control of the platform has been left in the firm control
of the company.
Analyst Bill Sharpe of ABN Amro was another doubter. He said that even
in the midst of his announcements about Linux, Ed Zander was still
throwing mixed signals about the company's commitment to the Linux
Sharpe had a point. Many of Zander's statements were contradictory, at
best. At one point during an analyst call, Zander insisted the company's
support for Linux would not change its emphasis on Solaris. He maintained that
the company's strategic direction was focused on migrating Linux users
to the "more robust" Solaris platform. At another point he maintained
that supporting Linux and Solaris didn't mean the company was supporting
multiple platforms. Instead, he suggested that Linux and Solaris were basically
the same thing, kinda.
In fact, if you didn't listen closely, you would have sworn Zander claimed Sun invented Linux. According to Zander, "Linux was created over time and was mirrored on Solaris; so you can go back and forth easily." At one point he went so far as to insist
that Sun was supporting Linux to keep the Unix market from fragmenting.
He also suggested that Sun could "advance Linux" by "adding Java and
A moment later he insisted that no one cared about operating systems
in the low-end server market in any case.
That was an issue for a number of other observers. Sun's announcement
that it was going to create Linux-based servers on an Intel platform
mystified one hardware analyst I know. He called after the conference to remind me of the troubles other Linux-based hardware vendors have had. "Quite a business plan these guys have got," he said.
Other portfolio managers felt that by conceding that Linux was the wave
of the future, the company was effectively acknowledging that IBM
had grabbed the lead in the Unix server marketplace. They wondered how
Sun expected to develop a services business fast enough to offset the
falloff of its proprietary equipment business. One noted that "70% of IBM's
gross margin comes from other-than-hardware while Sun's business model
derives 70% of its gross margin from hardware" and almost none from
Clearly, Sun faces a gauntlet of challenges as it moves more firmly
into the Linux marketplace. But the company seems to be committed, and
it doesn't seem to have much of a choice.