Offering Color on our Q1 Performance


We announced our first quarter results on Monday after the close of the stock market. You can read the press release here. And as usual, I thought I’d offer some thoughts around our performance.


We’ve heard a number of questions, as we do every quarter – this quarter, those questions came down to basically three areas. What went well within the quarter? What didn’t go so well? Why didn’t you grow – augmented with why did the share price decline?


So, without a lot of fanfare, here are some thoughts.


What went well?


I was very pleased with the leverage in our operating model – that’s just a polite way of saying we delivered our single biggest Q1 profit since 2001, and it’s good to be back in the habit of making money. Even in what’s traditionally our toughest quarter of the year, and even with a restructuring charge that took three cents off our GAAP earnings, we generated $89 million in net income.


We executed on our R&D, and delivered a seven year high in gross margin – up 5 percentage (yes, percentage) points year over year to 48.5%. Product gross margins were up 5.3% year over year, services gross margin was up 4.3%. Customers appear to value what we’re building, and our teams are executing well.


While our overall revenues were up only 1% over the prior year, deferred product revenues were up 18% (or roughly $100m). Deferred product revenue represents products (hardware and software) we shipped, that either hadn’t been installed or met customer acceptance criteria – we will recognize them in the near term, and it’s generally good to have a growing backlog of deferred revenue. In addition, we took roughly $20m out of channel inventories as we make progress toward managing our business on a “sell out of the channel” basis, vs. “sell in to the channel.” This shift makes us more transparent for investors (we recognize revenue on customer activity, not channel enthusiasm), and more effective in working with our partners.


Again, while overall revenues were 1% up Y/Y, our high end and mid range business was up 23% (year over year), our Niagara chip multi-threading systems were up a fantastic 70% -to a $750 million annual run rate – and our X64 business was up 10%, with blades generating around $40 million) and growing nicely, along with good momentum in our higher scale x64 platforms (as I’ve said before, virtualization depresses units in the short term, but increases configuration, ASP and margin). Our storage business stabilized, and grew faster than Sun overall, at 2.9%. Storage is getting a lot of focus, both at the software level (you probably saw we just introduced our CIFS implementation into the OpenSolaris community, which makes it an ideal NAS platform for Windows users), and at the hardware/system level, as well.


We delivered a big cash quarter, generating $574m, our biggest Q1 cash flow in… well, recent memory.


So net/net, we had lots to be pleased about – in addition to announcing new relationships in which IBM agreed to OEM Solaris, Microsoft agreed to support our virtualization efforts (and vice versa) and Google agreed to promote StarOffice, we also demonstrated our confidence in the business by buying back a massive $1.25 billion in JAVA shares. We put our money where are mouths are, for those wondering.


What didn’t go well?


The top line revenue growth was marginal – at around 1%. Deferred revenue isn’t counted, obviously, and we chose to take inventory out of the channel, knowing it would go against revenue within the quarter. That yielded a mixed bag on the top line, even with help from currency shifts.


Although our EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific) businesses grew (some geographies, like India and China, in big double digits), our US business was down roughly 4% year over year (and at 40% of our revenues, if the US catches a cold, Sun catches a cold). Why was the US slow? We don’t have a crystal ball. Was it related to the US mortgage crisis? I can’t imagine it helped. Some financial customers grew, others shrank. Partners seem more excited than in a long while. So there’s no easy analysis.


Our volume systems business grew only 3%, so our total computer systems business grew only .5%. Our new products haven’t eclipsed our legacy businesses – even though the former are on good ramps. Our support services business was down just under 1%. And we had demand for several non-shipping or new products, notably our newest quad core x86 servers and eight core Niagara 2 systems (both now shipping), but some customers may have waited for Q2. Again, very hard to tell at a global level. On an anecdotal basis, customer sentiment is way up on Sun. But sentiment and purchase orders are authored with different pens.


But push comes to shove, the only thing I was disappointed in was our top line growth – nearly every other metric is now moving in the direction we want. Financial measures, like margins, cash, predictability, quality, competitiveness of the product line – all the right foundational elements. And longer term measures – adoption around OpenSolaris, support for Java on devices and among the developer community, analyst ratings.


So fine, why didn’t you grow? Why’d the share price decline?


As I said, we don’t have a perfect answer, other than to say – we don’t see competitive issues holding us back, the team is executing well, and the brand and reputation of the company are now amplifying opportunity, not depressing it. The single biggest issue was some customers slowing down some purchases in the US, but it wasn’t specific to financial services (although companies in the midst of CEO transitions tend to put a lot of things on pause), or even more general to all customers (several industry sectors grew, like our government business).


Why’d the share price decline? This is obviously a question lots of folks asked (especially after today’s market decline) – and the only answer I can give definitively, and without meaning to be cavalier, is that there were more sellers in the market than buyers. The opposite of what makes our share price rise.


And just in case we failed to make it clear, of course revenue growth remains our highest priority. We’re focused on taking a refreshed product and service lineup, into markets we expect to grow across the earth – and investing to deliver value to customers and shareholders. In my view, we took another step forward in Q1.

42 Comments

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42 responses to “Offering Color on our Q1 Performance

  1. Bull’s eye, as usual, Jonathan. Revenue growth has got to be the primary focus. Now that the costs are under control, the topline remains the only concern. That’s when Sun will well and truly be in the black (though as per the book Sun’s already been in the black for a year now).

  2. MakGeek

    Thanks for your didactic clarification. I bet after the conference call I was not as informed as I am now after reading your highly structured comment.
    Keep on moving! One day the SUN will rise again and I hope that it will be after SUN releases a product (TBD) that targets the mass market. In my opinion SUN should keep corporate clients happy but at the same time create a source of revenue from the mass market so that if there is a revenue decline from the big clients, the mass market can bring some sort of compensation. It’s risky to rely only on one market segment. If you look at all your competitors they all deal with corporate customers (servers and storage) and the common guys (PCs and laptops). It’s true that the margin for the mass market is ridiculous for some products but it’s the volume that makes it profitable. SUN can release a different product for the mass market. I trust your R&D team for that magic product to come.

  3. Ujjval

    Hi Jonathan,
    Job well done (so far). I as a long term investor (not a speculator or day trader) like the way Sun is executing under your leadership. Also, the analysis you gave in this blog is one of the best I read since Q12008 result announcement. Though it hurts (very badly) to see stock tumbling 8-10% in a day, I wouldn’t worry much. As a business parter (vis-a-vis a JAVA share holder) I am happy with the performance and looking forward to Sunny days in Q3/Q4 and onwards.
    Thanks for this blog. Also congratulation for getting approval for 4-to-1 reverse stock split approval. Though it is cosmetic effect, it will help to keep some long-term investor with us.
    Thanks to entire Sun Microsystems team for the good execution.

  4. Happy Tobuy

    I would have preferred this post on Monday night or Tuesday. Then perhaps I’d still own the stock.

  5. I think it is a good investment but i need such information like this a short time earlier. Thank you.

  6. Jonathan ,
    I have accumulated about 5000 shares of JAVA over last 12 months based on your blog postings. Everytime I read your stuff , get the feeling that you are saying the truth and from your heart.
    I hope my instincts about you turn out to be right. I am not a big trader and 25K of investment for me is VERY BIG.
    So PLEASE DONT DITCH us like the ENRONS

  7. Gage

    Good summary, but one thing that has been completely lacking is the relation Sun will have with the new google phone software. Your last post seems to think Sun is relevant in that sphere, but for the great unwashed, could you spell this out a bit? Thanks for putting an intelligent, confident and believable face on Sun.

  8. Kebabbert

    I want to ask you a question:
    Is it better to sell one big server for 1 million, or 100 smaller servers total 1 million? I think that it is better so sell several small servers. Because they probably will end up in several different companies and therefore increase the penetration of Solaris. Which is a good thing. All the companies that tries out Solaris will likely generate more buys.
    Therefore you should make it simple for smaller companies to buy, and also private persons. Say a person wants to buy a cheap server with 4 sun rays, that would be something!!! "Save time and money, instead of buying and administrating 4 windows computers". If you want to compete against Linux, you must make Solaris easier to get – which is done. And you must also make your hardware easier to get – which is not the case: too expensive for smaller companies, and smaller companies and persons get neglected – private persons can not buy Sun Rays. The smaller companies will grow big sometimes. And the persons trying out Solaris at home, will likely want to have Solaris at work too.
    Make it easier for Solaris adoption. Lower the barrier. You should seriously consider introducing low cost hardware, a "value line" that makes it easier for private persons.

  9. Marcelo

    This is exactly what you should say in the CC. A short analysis of what it was and a forward outlook (not guidance). Next time, would you take an extra 15min and give us the forward outlook for Sun? Thanks in advance.
    PS: And I’m very pleased with the CIFS announcement. It will open so many doors for Thumper…

  10. Sunemployee

    The reason the share price is going down is quite simple – shareholders, and a lot of analysts, don’t see Sun making more profit in the near term. People hold shares to make money, not to share (no pun intended) in woolly visions like ‘Open Source makes money (but I can’t prove it)’. Perhaps if Sun got onto a more commercial footing, driving costs down and profits up MUCH harder, we’d see the share price go up.

  11. Well, it just goes to show that investors aren’t really convinced. Yes, you can cut costs and make it "look better" to Joe Average Investor, but if you aren’t growing revenue and have no concrete plans to grow revenue, Old Man Investor is to going to drop you like a sack of bricks. I admit I’m loyal to Sun, no matter what. My Sun roots run deep, since like forever. So, I’m working on something for Sun, from the pure kindness of my heart. I want to put a few 1U servers in some truly mobile applications, read: your car/minivan/truck. I’m going to create a truly mobile office. I’m going to wrap the cars/trucks/minivans in Sun Logos and put them on the road. You are going to see Sun everywhere, and you are going to go "WOW!", and you are going to have renewed childlike wonder in your hearts. Sun is coming back, Sun is coming up, in a big way. Eat my shorts, Bill Gates! :) (Have a nice day)

  12. tmac

    Articulate, clear and informative. This posting gives me – and 34,000 of our peers – good information without candy coating. Thank you. You answered questions that are on many of our minds today.

  13. Bryan

    The biggest problem I see is that the latest hardware all requires Solaris 10. A lot of companies, including the brokerage firm I work for in NYC, are still on Solaris 8 (maybe 9) and the latest servers (both SPARC and x86) requires them to migrate – something companies like to put off.
    When customers finally upgrade to Solaris 10 it will enable them to purchase the latest Sun servers and Sun will be back.
    The new Solaris 8 containers on Solaris 10 for SPARC is helpful (http://blogs.sun.com/psilva/entry/deploying_solaris_8_systems_using).
    I think Sun’s should publicly target large companies in helping them move off older versions of Solaris NOW while they are still Sun customers. The move to Solaris 10 is key.

  14. What is up with the 1-4 reverse stock split? Can’t get to double digits naturally so fake it? Please, what was the reasoning for this?

  15. thomas laviano

    I thought I heard scott mc. say one day that the finical world measure java ‘s performance in ARPU. (average rev. per user) this goes back to the intro. of the sun ray comp.I thought the consumer was going to get a sunray through a phone co. or cable co.

  16. dhabben

    The share buyback is good and necessary as JAVA has a ton outstanding. Keep up the good work 244.6 million at an average $5.11
    The reverse, usually seen as a last ditch effort, or the kiss of death for a company, is not the case here. Many funds will screen out companies as investments no matter how good the revs, margins, cash flow, ratios, etc. are because of a low share price. Not that JAVA needs more institutional investment (68.5% roughly) but it never hurts.
    JAVA has been one of the most heavily shorted shares on the S&P over the last years, couple that with the $700 million convertible debt investment from KKR…. arbitrage anyone…? Possibly why the shares are down.
    At the end of the day, don’t worry about the price of the shares because there is nothing you can do about it. This company is an investment, a restructuring play if you will, not a trade. If you feel that management is moving the company in the right direction, and so far so good, then stick with it.
    I like Deferred Product Revenue and would like to see it continue to increase as this is bringing in forward revenues, and thus shows that while top end is not growing substantially, it really is. Med/High end business takes longer to install or realize, but I feel that is the more important focus as Med/High end customers are not as price oriented. They are geared more towards power and the long term value of cost savings; servers are expensive because of the cost of running them is more than the cost of the actual server. If you have the most cost efficient and powerful servers you don’t have to lower your prices…
    I am more curious about the component costs in relation to margins. Low component costs are obviously beneficial but are they sustainable? If not, how dramatic of an effect would that have on margins going forward?
    Also, US sales down year over year, and account for 40% of revenues. The talking heads squawking about recession. How dramatically will a slowdown/recession in the US affect sales? Something to watch out for.
    US$ is weak, strong overseas sales is definitely a benefit, a stronger focus on Chindia and EMEA is imperative.
    Everything is turning slowly but surely, and don’t rule out inorganic growth. Maybe an acquisition in the tape/virtual tape business?
    Then again, what do I know…

  17. sd90630

    The big mystery to me is why no mention of Project Blackbox. So much hype and didn’t come up at all during the Conference Call, not even a question from the analysts, especially considering the Google patent issue. You’d think this would be perfect product with all the overseas growth, just ship them over there, plug it in and you’re up and running.

  18. whystopnow

    This needs a bit of translation:
    - sun laid off some people and cut expenses ("restructuring") and was able to eke out a small profit
    - sales are not growing. support is not growing. sales in the US are declining (or, uh, "getting a cold"). market share is declining.
    - the marketplace does not like what’s happening at Sun, and hence the stock price is going down.
    Spin however you want, but those are the cold facts.

  19. Mr. T

    Schwartz, you don’t seem to get capitalism.
    While Sun is spending at a rate of 1.5 billion in R&D annually, your
    sales "grew" at an inflation adjusted rate of -2 percent.
    The sales results are a symptom of the bigger problem: your strategy
    for competing in a competitive industry is not working. Sure, you can
    cut costs, and generate profits, even with stagnating sales, but that
    will not correct the competitive issues.
    Why is Sun not competitive? Look at your financial model, and compare
    it to other companies like HPQ and IBM. Do you see the same
    characteristics? Do you want to emulate your peers or blaze your, new
    untested path? Oh, yes, I remember, as you once blogged, only
    ‘different’ is better, but different in this case means lower growth,
    lower margins, and lower profit.
    Without caveat, you say that Sun’s storage is growing, but you neglect
    to mention that Sun market share in storage has been declining in a
    rapidly growing industry.
    So no, the short term nor long term success of Sun does not depend on
    growing sales. As always, the success of Sun depends on strategy,
    leadership, and Sun’s most valuable assets as a technology company:
    it’s technology (intellectual property), and its employees.
    Now for my parting cheap shot. Bill Joy is no longer with the
    company. Who does Sun consider as it’s technology visionary?
    According to you, your visionary is the open-source community. Let’s
    face it, Schwartz, the open-source community does not have Steve Jobs
    talent.

  20. SE

    Sun stock went down because the NASDAQ went down. It was a market phenomenon that happened.
    At 0.01 / share, no one should expect a 6 dollar / share stock price anytime soon. To the guy who has 25K in SUn stock, keeping it long term is a good idea. The repurchase will bring the price up. I’d sell when the stock price hits 23 or 24.

  21. Rick O'Shay

    Short terms traders realized the disappointing top-line growth was unlikely to juice the share price so they backed out. Hey, they are providing liquidity and that’s a good thing. IMO, that is why there were more sellers than buyers.
    I was disappointed in the Google Android announcement in that they did not mention Java. I suspect they will provide a C++ based Linux API for the gPhone SDK with some sort of vertical dynamic scripting language. I don’t like the idea that a small crew of hardy boys has foisted, well, offered up a "solution" that hasn’t undergone review by the "community", as it were. Then again, it might be stellar, we just don’t know.

  22. Kevin

    Please consider using your $5bn cash pile to pick up some good value smaller companies that will help you to drive revenue growth. With the market down right now, you can get some great value. The strategy seems to be working for Oracle (although they still don’t understand Open Source).
    Personally I believe that Indiana and GPL3 licensing will bring in the next growth wave for Sun. With your Ubuntu partnership, you can be the next Red Hat growth story.

  23. Why invest on Sun ?

    You have real number on server and storage sell, however, whenever you talk about Solaris and Java, I can not find solid numbers with them. How about StarOffice ? How about Java FX Mobile ? How about Glassfish ?
    Sun’s shareholders are also shareholders of other vendors. You have to convince them why Sun is a better investment target than IBM, HP, and DELL are. Sun have a not-so-bad Q1 as you explained, so do your competitors ?
    TO be even more convincing is tell me how many customer buy your system because Solaris 10, how many customer buy your system because Java. What I heard is several key app can’t run on Solaris 10, your smart engineer create a Solaris 8 on 10 fix for those customer have to migrate due to EOSL.
    Last, Sun still have revenue income from software adoption, such as Java ME license fee, Sun charge a few cents for each mobile phone, the total is not a small number. Why not publish the number ?

  24. Dear Jonathan Schwartz,
    Good signs. Very good signs.
    Looks like the figures are dressed down, with the deferred product revenue unaccounted and the channel inventory recall hidden out of view. Characteristically conservative.
    It doesn’t really matter if the improvement is 1%, what matters is that it is symbolic of what is to come. Now that Sun is back in the habit of making money, the shareholders will see plenty of it in the days to come.
    And, why only $ 1.25 billion or a limit in an overall approval to $ 3 billion? Apart from using the cash in hand, are there possibilities for some kind of a leveraged buy back / underwritten buy back? $ 1.25 billion in money value of JAVA shares isn’t massive ( 8 to 10% of common shares outstanding? ) , but perhaps 1.25 billion in numbers of JAVA shares out of the 3+ billion common shares outstanding could be considered massive. Why is Michael Lehman so slow (so little so far) to pick up $60 worthy shares when available for under $6? The markets are pretty, pretty kind by choosing to continue in their historical slumber on the value of JAVA, and it hasn’t dawned on the markets to wake up even when you renamed SUNW to JAVA. Such kindness has perpetuated the opportunity to own more of what is your own.
    There are corporations without a foundation, built on a vertical stack of cards. Even such stocks are deemed sought after by investors, because the rest of the world is buying those stocks. Sun Microsystems is deeply rooted in a rare, very rare concrete mix of innate wealth but its value seems to be masked by the superficial mist of the markets’ typical judgmental mind set. The markets are still not realizing that Sun has a ocean of resources.
    In the recent past, you have been orchestratedly churning out the innate wealth chunk by chunk with visionary moves. Not counting the hardware and software and the people wealth, Sun has always had an intangible wealth of relationships. Either building on what always existed, or, anew, the relationships with Google, Microsoft, Oracle and IBM represent augmented wealth. These relationships are path breaking and immensely valuable.
    These partners are big so I assume that they are evolved as businesses. These are not companies that are limited by business models, so they are bound to respond in a seasoned way if Sun simultaneously steps up completion with them on a side track while on the main track strengthening partnership initiatives. Or, vice versa on tracks.
    Google is a venerable partner and it is time to begin to simultaneously think of Google as a competitor to take on. Sun could begin by inventing a new storage concept that could be named Storehouse Satellite (not storage piggyback on a Voyager, but quite terrestrial), which should outdate any storage product that Google might have laid a patent claim on. And, if Sun hasn’t noticed or has chosen not to take note, Google has started toying with the idea of pricing an extra 150 Gigabytes of Gmail storage for $250 a year, which is an offer already online to those who sign up new Gmail accounts. Beyond Android, Google has its not so secret O/S aspirations as well, already taking shape component by component.
    David Ogilvy would have considered it so easy to defeat Google. Twenty Five years ago when Procter & Gamble ruled America, he devoted a chapter on Competing with Procter and Gamble in ‘Ogilvy on Advertising’ on the theme Who’s Afraid of the Big Bad Wolf?
    He presented P&G’s amazing strengths and its unparalleled discipline in business methods point by point in a numbered list which precisely described Procter & Gamble as the Colossus it was and continues to be. Ogilvy concluded his frightening description by saying that all that one has to do to defeat Procter & Gamble is simple: make and sell a better product.
    Sun has immense strengths to create and offer products (not free email, not just storage, not a search engine) that would get JAVA fly past GOOG several fold in NetWorth. Sun has a lot of wealth that Google doesn’t have, to build products on, products far superior and better than a Google or for that matter a Microsoft.
    There is so much wealth within Sun, and so much of promise. I wouldn’t really worry much about how the markets have so far responded. I am secretly happy that the markets haven’t responded. May the markets stay with the stocks of more apparent fortune for a while to perpetuate the blessing in disguise to let Lehman shop JAVA with another basket, a much bigger one.
    Safe Harbor to SEC: I haven’t met Jonathan Schwartz yet, so I am far from an insider and I don’t trade JAVA.

  25. dev_null

    Courage is in vogue at Sun. If Sun wants to grow, do you have the courage to:
    - Fix the processes instead of deploying new ERP and new products. Anyone buying from Sun knows that the deal goes to the partner at some point because the Sun reps don’t want to deal with internal beauracracy. What happened to millions spent on GE six sigma?
    - Allocate the resources to help the customers instead of superflous Cheifs of Operations, cheif administrators and Cheifs of Staffs.
    - Stop the massive ERP deployment which may be beyond its budget and schedule.
    - Stop looking for the crystal ball, analysis, etc. Instead of blogging and second life, walk the hallways of your campuses and talk to your front line employees face to face. Pick up the phone and "LISTEN" to your people.
    - Foster a culture which doesn’t resemble Baghdad on a balmy day.

  26. Concerning JAVA share count, please keep in mind that the
    goal of share buyback programs (at least historically with
    Silicon Valley tech companies), is not so much to meaningfully
    reduce share count from historical averages, but to stay "even"
    with the watering due to executive & employee stock options.
    Gleaned from annual reports, for mavens of SUNW/JAVA diluted shares outstanding,
    here are the figures from 1991 (in billions, split-adjusted)
    1991 3.54
    1992 3.47
    1993 3.47
    1994 3.13
    1995 3.18
    1996 3.17
    1997 3.14
    1998 3.18
    1999 3.28
    2000 3.38
    2001 3.42
    2002 3.24
    2003 3.20
    2004 3.28
    2005 3.37
    2006 3.47
    2007 3.61
    The pattern here shows a rise into the Y2K bubble ending 2001,
    and another rise during the last few years post-bubble.
    The historical average is 3.33 billion shares. In the larger
    scheme of things, the buyback may just track this average,
    as long as stock options and/or restricted share awards exist.

  27. Raghunath

    Why don’t you make your new Niagra2 platform available/cheaper for PC builder?
    Use your relation ship with Microsoft to port Windows Vista/Xp on that!!! yes I am not day dreaming, you also do the thing like what apple did with for I mac use a x64 Emulator , Todays PC requires all the 64 threads not just sit in one container with one thread.
    with 64 hw threads that laptop/Desktop will be screaming all the way, you can reach the mass market with this processor alone.
    Intel’s major revenue is from the mass market, why don’t you get into the same path?
    You can still charge a premium for a corporate but make the processor available to common man, talk to companies like Nvidia/Via/Ausus/Asrock they will be able to come out with $100 motherboard and may be $100 to $150 for the processor!!! will make it lot competitive even with a small margin but high volume, you may be the next Intel.
    Dont just look at Big companies only take this advice to your share holders see what they have to say?
    I can predict ~10 to 15 billion dollar business just alone in this, not only that you will be eating in the Revenue of Intel Significantly.
    Good luck:-)
    -Raghu

  28. Dirk Pitt

    Speaking of things that didn’t go well…
    I don’t understand why Sun won’t fix docs.sun.com? That website is the lifeline to your customers so they can properly administer & maintain Sun HW/SW products. It is so unreliable, sometimes it works, sometimes not. Why don’t you simply prop it up as a site to download PDF documents? That would be much better then what it is now!
    Today, I simply wanted to look @ Solaris 10 8/07 Release and Installation Collection & received this error:
    Server Error
    This server has encountered an internal error which prevents it from
    fulfilling your request. The most likely cause is a misconfiguration.
    Please ask the administrator to look for messages in the server’s
    error log.
    I’ve sent requests to the webmasters in the past for help, it done no good.
    Please help Jonathan, please help!!!

  29. MakGeek

    I agree with Raghu 150%. There is no point making Solaris free when the user cannot buy hardware from SUN that is optimized for it. What’s the point of helping DELL and HP? They are the ones that benefit from a free Solaris, not SUN. I bet that at least 90% of Solaris downloads are for HP and DLL hardware and the meager 10% are for SUN corporate customers. Niagara II cost at $1000 is well in the price range of desktop PCs. BTW I bought Athlon 64 2 years ago at almost the same price and performance wize these chips are not in the same class.
    Why not license Nigara II to PC builders that would ship with Solaris and Linux?
    Jonathan, I am serious that I will be the first to dump my Windows XP and Visual Studio 2005 for a Niagara II PC powered by Solaris and Java. I am still feeling that SUN does not get the real meaning of the power behind Niagara II on the PC front. That can drive gamers crazy and you have a real business opportunity right under your bell.

  30. What is up with the 1-4 reverse stock split? Can’t get to double digits naturally so fake it? Please, what was the reasoning for this
    Good luck

  31. Sam

    Sun is a long term play and my personal view is that it will take 3-5 years for Sun to recover from its own strategic missteps and to significantly moentize all its effort it is putting into the Open Source movement… let’s be patient everyone…

  32. Get Real

    Yourself and Scott both suffer from the same disease. You both lack the ability to identify products that can be monetized into relevant revenue streams. Contrarian views ? Your jobs are not to martyr java or zfs ! Neither can generate a revenue stream worthy of getting your company growing at rates that are even close to the sector you are in. Why don’t you face the facts… it’s time for new leadership that is interested in generating shareholder value, not leadership that is the equivelent of a bunch of young adults on a college campus that just discovered their political voice of dissent. You guys have just become pitiful……

  33. Robert Weiler

    It isn’t any secret why revenue didn’t grow; it is the inverse of profit margins going up. Those fatter margins translate into higher prices than the competition (because everybody is using roughly the same commodity parts), and those higher prices translate into fewer sales and less total revenue. There is no mystery here, it is all economics 101. Presumably, Sun sets prices to maximize profit, but given the silly list prices for Niagara II machines, I find that really hard to believe.

  34. roofpig

    Mr T thinks Jonathan doesn’t "get" capitalism?
    I thin the people who don’t "get" capitalism are the ones who believe that buying a stock makes them "investors."
    A true INVESTOR provides working capital to the company, e.g. through venture capital or a public offering. Or perhaps, in order to be charitable to people who found a company at a personal cost that exceeds the monetary sacrifice, you might stretch the definition of an "investor" to include people who contribute something else that a company can monetize, like intellectual property. But despite the fact that people tend to call stock purchases "investments," from the perspective of the company involved, the investment typically happened a long time ago. No new investment is happening with the change of shares, and it’s very curious to me that people seem to believe the act of buying shares gives them enhanced standing when they wish to criticize the running of the company.
    People who buy stock on the exchange more closely fit the definition of SPECULATORS: they buy something and hope it will appreciate so they can sell it for more than they paid. Speculators provide an extraordinary valuable service to the original investors by providing liquidity. And by buying out the investors it can legitimately be said that they "own" a bit of the company. But the act of buying the shares does not make an "investment" in the company. (Especially when the idea is to make a QUiCK profit; in what sense of the word is a day-trade an investment??!)
    If speculators opened their eyes and saw themselves as such, I believe they’d be much less quick to whine when they’re not getting quick payoffs on their bets.

  35. sun fan !

    why is stock symbol showing up as JAVAD ???????? is this again a change in ticker symbol ?? or is this some temporary marking during reverse split process

  36. carlos fandango

    No mention of Australia’s staggering performance?

  37. Peter Firmstone

    Honest, direct and telling it like it is Jonathan. The difference between Sun and other large IT companies is: Sun creates business ecosystems, open to competition, driving innovation and choice, benefiting customers. Other companies try to own and control, with tactics that destroy natural competition, benefiting a small minority, creating disruptions and roadblocks to customer productivity. The sad part is, most of those customers either don’t realise or just maintain the status quo, its the easy thing to do, I pity these people, they will suffer most from proprietary platforms, vendor lock in bites hard when support is dropped, they’re reliant on products destined to become abandonware.
    By its actions and transparency, Sun’s business strategy is long term, Sun’s platforms are the future.
    To the doubters and detractors on the blog, try the products and see for yourselves.

  38. Jonathan-
    I am very impressed by the way you are running Sun. I was a long time customer until 2001 when I switched to Dell as our primary vendor (with Cisco/Netapp). We are a relatively small customer with 200 servers, but I hope there is an opportunity for me to become a customer again.
    This morning after I read your post, I went out and bought Sun stock. Keep it up and keep blogging. I believe in what you’re doing, what you’re about and the way you’re leading.
    –Chris

  39. Hi Jonathan,
    I think you’ve done a superb job as the new CEO of Sun. Turning around a large company like Sun is not easy and so far you have done an excellent job at increasing revenues. You have a noble cause to provide cost effective computing as well as to save the environment with lower watt usage for the CPU.
    Keep up the good work. Too bad i’m unable to invest in Sun (in another country) else i would have done so.
    –Ping from Malaysia

  40. Gil

    JS,
    This press release hits the nail on the head on what Sun is about "Sun will push the envelope for what is possible with virtualization in the enterprise.” I like it, use it more often. Late

  41. Gil

    JS,
    My take on this Oracle Open World. As soon as Sun buys MySQL and EnterpriseDB along with GreenPlum (don’t stop there buy all the great up and coming open source databases) Sun will gain Respect in the market that it doesn’t have right now. As long as Sun pins it’s hopes on Oracle, Sun will just be Oracle’s 3rd puppy behind IBM and HP. Sun has tried to ride Oracle’s coattails for the last 7 years and look at the track record-road to nowhere, now you have Oracle nipping at your business in SOA if they by BEA Systems and Google nipping at your business in Mobile fracturing JAVA again like Microsoft did. Take the bull by the horns and go for it be a leader not an Oracle follower, til then I’m out. Peace

  42. jz

    http://blogoscoped.com/archive/2007-11-13-n83.html
    The title is "How Google Android Routes Around Java Restrictions"
    I am not sure what you think about it.Is that true?It sounds Sun could not expand her affects to the mobile device,or even Java world?

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