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McNealy: "We're Down to Three - IBM, Microsoft, and Sun."

McNealy: "We're Down to Three - IBM, Microsoft, and Sun."

(July 31, 2003) - Sun supremo Scott McNealy hit Europe this week... and he's definitely not pulling any punches!

While the overall purpose of the visit is to walk the Java talk and preach the business value of using Sun's technologies to integrate enterprise computing, there are numerous undercurrents to McNealy's mission.

First he is keen to distance Sun from the industry conniptions surrounding the whole "SCO vs Linux" scenario. Though he declined an invitation to comment on the outcome of the billion-dollar SCO vs IBM lawsuit, he was more than happy to state for the record: "I'm thrilled to death SCO can't revoke our Unix license."

Second, McNealy is determined to emphasize how Linux, though it may have its merits, is in his view no great shakes compared to Sun's proprietary solutions when viewed from the point of view of integration "With Red Hat," he told one British reporter, "you get the kernel. With Sun you get the app server, the directory, the portal, the integration server, the file system, the clustering... and 15,000 plus applications."

"And you get software indemnification," McNealy added.

His third aim was more controversial. There really is no stopping Scott McNealy once he has an audience for his zeal for Java, but he kept his best shot - Oracle might say, his cheap shot - for last.

When asked about Sun's recently reported loss of $12 million dollar for Q2, after 35 consecutive quarters of positive cash flow, he adduced the stringent GAAP reporting code - which enforces certain write-downs on tech companies like Sun. Then he went on to address how the IT sector is headed for a renewed phase of consolidation.

"The question is what is happening to the total IT budget," he said, before answering it himself: "I think it's going to shrink. We're down to three - IBM, Microsoft, and Sun. The rest is collateral damage."

JDJ Industry Newsletter is currently waiting to hear back from a certain rival company based in Redwood City, CA, as to what they make of McNealy's dramatic claim... indeed we are wondering if perhaps the owner of 26% or so of its shares himself might have a somewhat different view: one Lawrence J. Ellison.

More Stories By Jeremy Geelan

Jeremy Geelan is Chairman & CEO of the 21st Century Internet Group, Inc. and an Executive Academy Member of the International Academy of Digital Arts & Sciences. Formerly he was President & COO at Cloud Expo, Inc. and Conference Chair of the worldwide Cloud Expo series. He appears regularly at conferences and trade shows, speaking to technology audiences across six continents. You can follow him on twitter: @jg21.

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Most Recent Comments
Saintbernard 08/15/03 10:55:02 PM EDT

1) I like the linux, But the big Sun Iron still rocks it's world for massive projects. In contrast to the niave, hardware for the big leagues are still not commodities. When I'm betting my job and company on absolute performance, I bet on big iron.

2) Everyone has written off Sun over and over and over again. And they continue to stick around. Maybe business schools will be studying how Sun keeps surviving when so many continue to write them off.

3) Its true that Sun has a poor history of managing past Software acquisitions. Let's hope they get a little wiser.
If they are wiser, maybe they should use all those billions in cash they have (ever wondered why a company so many are writing off has more cash than many of the big boys, like IBM and Oracle? what gives?)
for a different acquisition strategy:
options:

1) If Sun really is serious about having a major play in Linux, buy RedHat (about 1.5 Billion cash; cheap), Unless Project Madhatter is revolutionary, (much more than marketing hype or "me too" crap)

2) merge with Apple (much bigger deal)
could help both companies:
Apple knows user experience
Sun knows massive systemic quality design for big systems (and a little about Java too :)
However, if the management process is bad, it could turn out bad for both companies.

3) do not merge with Oracle:
why? Oracle has a DB and some enterprise software. But their pricing and support model is horrible. Bad move. no real advantages here.

4) Merge with an alternative technology company and utilize technology for alternative markets where computing is going into the future (pervasive consumer systems): good candidate: GE (a very good technology company and they could leverage a great deal from each other)

5) Keep all that Cash, clean up operations and software development and MAYBE merge with a systems integrator (but not a typical integrator). I would have Sun merge with Schlumberger (deep telco expertise and enterprise software for telco = a very popular area for Sun)

6) While I believe that large enterprise computers will not be commodities soon, I'm not sure about cpus. If cpus are truly becoming commodities, then maybe Sun should buy AMD (could be done with cash easy : cheap for Sun) and continue to differentiate with massive I/O and memory and FT capabilities in the box /frame (whatever you want to call it)

crazy SUNW stockholder 08/01/03 01:47:00 AM EDT

Scott is asleep at the wheel. He better go back to ever-losing Detroit City where he came from, home of the Lions, Pistons, Tigers, GM, Ford, Chrysler, AMC! Need I say more? He is a nice guy, but nice guys finish last!!

Luis Eduardo Colon 07/31/03 10:31:00 PM EDT

The alternate reality in which McNealy seems to live in is downright hilarious. The reality is that Sun is losing a lot of traction to vendors like Dell and IBM on Intel servers, replacing propietary UNIX with Linux. Sun's Linux strategy is, at most, background noise.

Scott should be thankful that IBM has embraced Java. Lots of companies embraced Java because of IBM's support, not because of Sun. The same applies to the acceptance of Linux, once IBM, Oracle, and others threw their support behind it.

Java represents the single most important competitive play in Sun's arsenal. However, with eroding UNIX market share, a virtually non-existent storage solution, a marginally mentioned app server, etc. Sun may not have much to fall back on besides Java.

And, as for the ridiculous comment of "with RedHat, you get the kernel, but with Sun, you get a lot more...", I think the only two people Scott may convince of that is himself and the guy he sees when he looks in his mirror. True, the Sun bundle tries to address integration nightmares, but others are targeting this as well. It is hard for Sun to win new customers, since alternatives for all those components, including integration services, are about half the price of Sun's hardware/software "solution".

Sometimes I wonder if Larry hurts Java more than he benefits it with these ill-devised arguments.

Stick to Java, Scott. Few people out there are interested in your Linux opinions.

Peter Beahan 07/31/03 09:41:00 PM EDT

Are you saying that Larry/Oracle owns 26% of Sun. Just interested, where is this documented? So no matter what happens, larry wins?

Carl Daver 08/05/03 12:36:00 AM EDT

Lets leave aside their hardware problems for a while and concentrate on the one good thing they have going for them. J2EE.
Where is their commitment to J2EE, the community (which is by the way is IBM,BEA,Oracle,Borland and Others) are doing all the work and all the shouting.Also Sun does not have a competitive Application Server nor does it have a competitive IDE and did someone mention database....
By the way, I for one would like to see a java based Object database.
I would also like to mention that although development time for J2EE is a little more i would definately choose it over .Net
Sun has definately lost whatever edge it had on the Others.

Scott 08/04/03 01:31:00 PM EDT

remind you of the former Iraqi Information Minister.

R. David Peterson 08/03/03 01:06:00 PM EDT

This whole argument about which is better, J2EE or .net is academic. So J2EE is open and .net is not. So J2EE is more mature. In the long run the only thing that matters is which platform has the most applications in production and J2EE has a HUGE (perhaps insurmountable) lead. Anyone remember Sony Beta?

Doug 08/01/03 09:53:00 PM EDT

How this arrogant loudmouth is still employed? Sheesh!

Ben 08/01/03 09:48:00 PM EDT

Scott what are you saying? I have been a Java supporter for the last few years, the last couple of years Sun seems to be missing the boat. First trying to laugh .net out of existence. Then failure to jump on the web services boat too very late.

Now you are under miming some of the companies supporting Java on the hardware front there is: Apple, Dell, and HP. Software wise Apple and Oracle are both very active Apple writing there own JDK and Oracle a major player in App Server market.

Lastly you are hardly providing leading edge Hardware or Software. Its hard to justify Sun hardware these days as it not providing a great performance increase over other much cheaper hardware. In the software arena the sun supplied JDK is one of worst preforming JDKs available.

Bill 08/01/03 08:15:00 PM EDT

the word hubris springs to mind or as Longfellow put it, ?Whom the gods would destroy they first make mad.?

Scott McNealy 08/01/03 07:12:00 PM EDT

The progression from winning stock symbol to dust-bin...

SUNW
SUNK
SANK
SANG (a swan song...)
WANG
dare we go on???

BANG!
BANK-rupt

Doesn't charge for Java. Can't make money against HP and IBM. The list goes on and on and on why Sun is holding a losing hand...

Dwight Domonkos 08/01/03 03:44:00 PM EDT

Don't think so. On today's valuation looks like Larry/Oracle will loose about 3.13B.
It's just a matter of time.

paul anderson 08/01/03 01:20:00 PM EDT

nobody asked you what you need to do development. Anyone can develop java apps almost anywhere (that's the point, stupid). The real point here is "who is going to buy industrial-strength servers and software on which to RUN the stuff we write.

Try to concentrate now - it's not about developer machines & tools. It's about the applications and their final resting place.

Raghuram Sharan 08/01/03 12:46:00 PM EDT

If we study the J2EE architecture, its really beautiful. JMS, JTA, JCA etc. are really nice concepts and make integration really easier. J2EE facilitates interoperability among heterogeneous systems.. I wish J2EE systems and Microsoft technologies co-exist and some standard binds them ; Or in other words J2EE and Microsoft technologies must interoperate. It will make the life of system integrators easy..

Harsh 08/01/03 11:21:00 AM EDT

Sun is the "Worst Run Company" and Scott McNeally seem to be a CEO with a real BIG EGO. I will not be surprised if 2 years from now, all the top business schools start give examples of Sun and Scott as "How not to Run a Company" and "How not to be a CEO".

Scott has compared Sun with Red Hat and listed all the things Sun offers that Red Hat doesn't. He just forgot 1 thing: Database. Nobody really needs Sun and it is part of "colateral damage" too. Sun does not have a database which is the most essential component in any application today.

Microsoft and IBM offer complete solutions right from database to app server to development tools and all the bells and whistles.
It is time to wake up and let go of the big EGO of being the "dot in the .com".

It is time to realize that we are down to just 2 : Microsoft and IBM. And ofcourse Open Source since most of the open source products are much better than Sun products. The sooner he realizes this, the better it is for the company and the shareholders.

Or the other option is to cash in the options while the stock is still above $3.

Sviergn Jiernsen 08/01/03 10:14:00 AM EDT

Sun is a manufacturer of hardware, first and foremost. Thus, their solutions are not geared towards being the best bang for your buck and saving you money, but towards encouraging you to buy as much iron from them as possible. The notion that a software platform should be controled by a (proprietary) hardware vendor is a dangerous one, and it stifles the future of that platform (yes, I'm talking about Java in general and J2EE in particular).

That said, the combination of Java and J2EE is the most extensible, scaleable, and dynamic software platform out there. It is the most modular, offers the cleanest separation of concerns (cf. Microsoft who basically throws everything into one mishmash and calls it a "framework"), and the most powerful overall. It CAN "run anywhere" but "anywhere" usually means Windows desktops just for development and Sun boxes for deployment. Linux is an increasingly viable option, even though Sun doesn't want it to be -- again, having a supposedly OS-neutral hardware-neutral software platform controled by a proprietary hardware vendor is asking for trouble.

Can Sun survive? Who cares, they all come and go, even Microsoft will fall of its own dead weight (as IBM with similar arrogance once did). The most viable path is for them to be bought out by or merge with someone like IBM or even Oracle--someone else with a stake in Java who's likely to keep it alive and open it up. But think about the scariest headline you can imagine in the computer industry:

MICROSOFT BUYS SUN
McNealy Condemned to Wearing Dunce Hat for the Rest of Eternity, Fetching Gates' Coffee and Licking His Shoes Clean

The sad thing is, this could happen if the two nine-year-old bullies running these companies keep at it this way. Personally, I'd rather see a truly open web application platform with Java's power (and native code's speed) come out of whatever battles ensue.

fletch 08/01/03 09:14:00 AM EDT

When Sun bought Forte(had good Java IDE/app server) and killed them with own inferior products I knew it was over. They are 2nd rate at knowing what to do...they wasted their money, killed a company that could have come up with a better Java product. It's just a matter of time before Linux slowly but surely eats away at market share until Sun which has shown they only stay a float because they had the best technology starts to slowly go down to an Apple status. Cool technology but nobody really cares.

Doug Smith 08/01/03 08:43:00 AM EDT

IBM, Microsoft, and Open Source. The commoditization we observe is taking profits out of hardware, software, and even certain kinds of services (off shore outsourcing, anyone?). As David Small pointed out, all the tools we need to develop and operate are available with zero cost licenses. The answer to Sun's problems (and others) is continuous innovation both technical and commercial, and higher quality personalized service. The treadmill never stops.

David Small 08/01/03 07:45:00 AM EDT

1. jBoss
2. mySQL
3. CVS
4. Eclipse
5. Tons of GNU open source suites, tools, and applets!

That's all I need to do development.

George Giles 08/01/03 07:23:00 AM EDT

I would recommend Scott McNealy watch the movie "Other Peoples Money". Sun is dead, just not broke. Spare your stock holders the agony of watching what little equity remains from evaporating becuase of mCNealy's massive ego. I lisetened to John Gage at lastyear's Oracle World and he was uttering the prayer of the dead (gotta watch the movie).

The O/S doesn't matter, the hardware doesn't matter, the dev tools do not matter. What developers think, and pundits spin does not matter. Only what the customers can do, cost effectively matters. The market has spoken, Sun is in the 15th round, punch drunk, staggering, gloves down ...

Donald Hsu 08/01/03 06:24:00 AM EDT

Your business is being squeezed by Dell, IBM, HP, BEA Systems, ..... and many others. Now is the time to get an exit strategy before your stock options evaporates:

1. Merge with Oracle
2. Get a new CEO, Ed Zander
3. Merge with Apple Computer
4. Merge with SCO and BEA
5. .....

Show time is over!

K. Vora 08/01/03 05:05:00 AM EDT

Scott has yet to learn the lessons Bill Gates learned when he was paddling old DOS with IBM. It was bend over and grease up. Scott only has to bend (shut up and put the nose to the grind stone), but he refuses. Look at Sun and Oracle. One may hear all the nonsense from Larry about Bill and MSFT, but he never stop supporting MSFT OS.

If Sun really believes in SPARC, it has to reach out to mass market. Besides Apple, there is no alternative for the computer platform in the mass market. A Sun work station with nicely pre-packaged software solutions would be a good start.

Scott needs to remind himself every hour of the day that computers (hardware and software) are commodities.

Per J?rgensen 08/01/03 04:16:00 AM EDT

Maybe the Sun is setting, and I agree that it has to be easier to make application using J2EE (drag and drop) like .Net.

But just to rool over and let Microsoft dominate the software World totally also on the client .. no way.

We (the developer) need competition to be sure that the tool provider doing there best .. all the time.

So Microsoft, Sun, IBM we need them all in the marketplace.

Marty Mazurik 08/01/03 03:43:00 AM EDT

I agree with a previous post.
After backtracking on a SPARC only claim three years ago to release an x86 based Linux server ... McNeally is grasping at straws.
And with Java ... although deluded masses gravitated over 8-9 years to this platform trojan horse ... whether it has successfully made it inside the fortress walls remains to be seen.
Personally, tools and solutions using .NET are quicker to develop, deploy and maintain ... and they're built by a software company.
The days of SUN and SPARC server edges in performance have ebbed with the tides of change ... and alas after the top brass walks out, leaving McNeally holding the bag ... I believe the SUN also sets.

Peter Wolf 08/01/03 01:46:00 AM EDT

Larry owns 26% of Oracle :-)

Anonymous Biggot 07/31/03 10:31:00 PM EDT

The top 3 application servers by market share according to Gartner and IDC are now IBM WebSphere, BEA WebLogic and Oracle 9iAS. I guess Scott forgot that Oracle's application server has more market share than Sun and also a lot more momentum in the market.

Vinay Soni 07/31/03 06:43:00 PM EDT

Java/J2EE is the most prominent and impressive language and application platform if there has ever been one.

He has a very good reason to shout out to the world about Java.