Will ‘monetizing’ Java help Sun rebound?

SAN FRANCISCO — No question Jon Schwartz is a stand-up guy. His employer, Sun Microsystems, has been hit pretty hard lately by pesky analysts and journalists, largely because the company reported a rather awkward $1.04 billion loss last quarter. Yet Thursday at his company’s downtown headquarters on Mission Street, the company’s chief software executive stood right up to the bar, took on some tough questions, asked some of his own, and offered good information in a straightforward fashion. Market-speak — or at least 99 percent of it — was checked at the door.

Wide-ranging discussion

In a wide-ranging sit-down conversation, Schwartz revealed a few news items:

Sun’s productization of Java in the form of the Jave Enterprise System and the Java Desktop Systems is the central strategy to improve its flagging financial fortunes. “JES will ship synchroniously for SPARC and Intel and with a 30- to 60-day window for Linux, both desktop and server,” he said. “And we’ll roll Solaris Opteron into that. It all runs today in 32-bit mode … the question is when we will run the 64-bit mode; it will probably be 2004.”

Solaris will become the third operating system to run on the new AMD 64-bit Opteron processors; SuSE Linux currently has a version that runs on the chip, and Red Hat has announced one for release later this month. Microsoft is circulating a beta version of Windows XP for the 64-bit chip now and will have a release version early next year. “Opteron is highly performant,” Schwartz said in a subtle understatement.

The company will continue to invest heavily in Java software for mobile and embedded devices. “Those are really, really good businesses,” Schwartz said.

In short, Sun is going to continue to bank on selling its own intellectual property, while allowing for outside partner products to be substituted when the customer prefers it. This is the best way for Sun to continue to distinguish itself from the IBMs, HPs, and Microsofts of the world, Schwartz said.

Much of the future success Sun has with this whole initiative depends upon whether customers buy into the “Java desktop” concept, for other reasons than simply rejecting Microsoft. Since the new JDS “product” is really a Gnome GUI that runs on Linux and includes the StarOffice suite, it is not a desktop that runs on “Java,” as Sun would have you believe at first glance. Yes, the package does include a Java Virtual Machine, but in itself, that doesn’t signify a desktop that depends upon Java to work.

So, Sun has a sales job to do. But first, it must deal with some cold, hard business realities.

“I agree with (Merrill Lynch analyst Steve) Milunovich — at least part of what he said,” Schwartz said. Milunovich wrote a critical open letter to the company Oct. 2, advising the company to refocus its product line, drop its Java software, and trim its employee rolls, among a list of other items. I had published my own analysis three days earlier here on NewsForge.

“Sun already has under way some of the things Milunovich was pressing for: We’re putting our operating system out on multiple chip sets, and we’re bringing pricing into line, so that there’s no doubt as to who offers the better deal,” Schwartz said. “But we’re hardly going to drop Java; what is he thinking? We have to use Java as the road map. That’s our key IP.”

Will the JDS commoditize the desktop?

Sun is offering the JES at $100 per employee and the Java desktop at $50 per user, in perpetuity. “At those prices, we are THE low-cost provider for accelerated systems,” Schwartz said. “At those prices, we will commoditize the entire desktop. That is our focus. We are on offense.”

Schwartz said that Sun started selling the JES about nine months ago to existing customers, and that the revenue wouldn’t start being recognized until November. “If you can imagine how difficult it is to get 4,000 people working on the same project, to ship the same day, with communication among differing chips sets for 224 products, to deliver them globally, and to get the service side up and running … it’s a huge amount of work,” he said.

Although Schwartz agreed with the analysis that the company must get back to profitability soon, he said that “Mr. Milunovich is a fan of theatrics. I don’t think he understands the industry too well. There is truth in saying we have to show revenue and earnings growth, and that we should be better at monetizing Java, but that’s exactly why we have taken Java and turned it into a product. Java is like the Internet; it’s in everything we do. How could we spin off the Internet team, as (Milunovich) suggests? He missed the fact that this is exactly what we’re driving at.”

How could this happen? “I don’t know, but I wish he would show up at our analysts’ conferences; maybe then he’d understand what we’re trying to do,” Schwartz said.

Early adoption zeal for desktop in Europe

Schwartz said was a bit surprised by the zeal early adopters have about using Java on the desktop, especially in Europe. “I just returned from there, and we’ve been seeing fabulous success in delivering a burnished, polished product,” he said. “Governments and corporations are telling us, ‘Okay, we’ve done Windows and been fleeced, and now we’re done.’ They’re eager to see what we have. We’ve put together a couple of 20,000-seat StarOffice (open source-based office suite that dovetails with the Java desktop) contracts already (he wouldn’t divulge who they were) and have some others in the pipeline.” Schwartz said the U.S. market hasn’t quite become clued in to the Java desktop yet, but that it was only a matter of time.

Isn’t Sun getting out pretty far ahead of the curve with all these new products? Knowledgable people have said that 64-bit computing is years away from common use — anywhere.

“If you look at your history, there is no one-quarter strategy in IT,” Schwartz said. “Our investment in JES was a five-year investment. We’re three years into a downturn; it’s tough to say when the world’s going to turn around, but we’re simply going to go for the best products and the best prices right now, and let people know about them. If they want them, we’ll have them.”

Schwartz again referred to history to answer those critics who think that Sun may become yet another Silicon Valley casualty if it doesn’t turn itself around soon.

“In 1993, before I came to Sun, Wall Street shorted Sun, and the industry wondered if we were bucking a fad — Windows NT,” he said. “Well, we focused on three things in 1993: quality, scale, and security. We kept our heads down and created a $120 billion installed base. H-P threw its operating system away and now uses someone else’s (Linux). We made an explicit decision to invest in Solaris, in Intel, in SPARC hardware. We’re still invested in all those things — now we’re investing in Opteron,” Schwartz said.

True. Right or wrong, Sun has been nothing if not consistent. For 21 years, the company has made mostly the right decisions; the next two to three years are crucial to revealing whether that pattern of success will continue.