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McNealy: "Sun Is Not Proprietary, Just As IBM Is Not Bankrupt"

"To call Sun proprietary is as big a lie as you could put in your newspaper"

Related Links:
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  • If anyone for a moment thinks Scott McNealy is going to take some kind of back seat in the public eye now that Sun has go-to president and COO Jonathan Schwartz dealing with the press and analysts on a seemingly equal footing with his boss, they are wrong. McNealy is still as combative as ever, as he proved when talking to the San Jose Mercury News this week.

    Asked about the $174 million loss Sun reported in the most recent quarter, McNealy countered with the simple ten-word riposte: "Where's the beef? We made money in the June quarter."

    But he saved his best shot at the poor reporter when asked whether there was any truth in the perception that "Sun is trying to lock in customers with proprietary technology."

    Here is McNealy's fusillade in reply:

    "For 22 years, I've said name a technical specification at Sun that is not open, published or adopted by some or all of the computer industry. You can't. To call Sun proprietary is as big a lie as you could put in your newspaper. If I were to say IBM is bankrupt and you were to publish that, that would be the same as saying Sun is proprietary."

    Asked about Sun's current share price, McNealy was equally unrepentant. "What do you think is a reasonable stock price for Sun?" he replied. "Does $4.20 seem unreasonable?"

    "We've got 3.3 billion shares of stock. That puts us at a $13 billion to $14 billion market capitalization. Take out net cash and you've got a $6.5 billion market cap. That's a half times revenue."

    When asked by JDJ at the beginning of the year where i-Technology was going in 2004, McNealy predicted:

    "The world is still going to keep a tight hold on its purse strings, and every dollar will be hard earned. There's no magic pill that's going to bring about an economic recovery. For the tech sector, it's going to take a complete rethinking of IT investments in terms of competitive advantage, operating and maintenance costs, and total cost of ownership.

    Plenty of companies are already following this path, and will continue to invest in scaling out their IT networks by leveraging the economics of industry-standard x86 computing, where Solaris x86, Linux, and open source alternatives offer up a pretty compelling story. At the same time, there'll be a renewed focus on scaling up, leveraging highly available 64-bit Unix systems for demanding government, enterprise, and service provider environments, as companies dial-up IT investments to keep ahead of the competition."


    Sun Microsystems CEO Scott McNealy

    Ten months on, McNealy's view of the economy is somewhat more opaque. "I saw the report on what is happening to IT jobs around here," he told the Mercury News reporter. "You haven't seen anything yet."

    Then followed an explanation which centered on the notion of "disruptive technology":

    "If everyone built their own custom car, the employment in the auto industry would be millions and millions. Now imagine Henry Ford comes along creates the assembly line. That would be very disruptive. So what does that do economically? If you are a truck maker, that is a good thing. If you are Dell, and you only do a piece of the work where your job is distributing piston rings to garages, it's not good."


    The concern that Sun's June-quarter profit, the first for quite a while, was only possible because of Sun's lucrative $1.6 billion cash payment from Microsoft to settle the antitrust and patent litigation between the two companies, was another issue that brought the wrath of McNealy down on the head of the San Jose-based reporter.

    Of the $1.6 billion he said: "That was a full cash write-on. Give me for credit for that. I just had a write-on instead of a write-off, cash in the bank, and everybody discounts that."

    During a conference call to discuss the September quarter's results, McNealy had been in a characteristically upbeat mood, saying: "The team worked really hard and executed on what is usually our toughest quarter."

    McNealy, Schwartz and his team said they plan to be very aggressive with Sun's new line of Opteron servers and are hoping that the continued rollout of UltraSPARC IV processors across the SunFire server line and the upcoming release of the Solaris 10 operating system, due out by year end, will strengthen the company's performance moving forward.

    The main thing McNealy stressed was that that Sun's revenue had increased for the quarter - to $2.63 billion from $2.54 billion for the same quarter a year ago. Useful, in a quarter that included Sun's payment of $82 million to settle its long-running patent dispute with Eastman Kodak.

    Related Links:

  • JDJ Exclusive: Scott McNealy's 2004 Predictions
  • Kodak Wins vs Sun: Java Infringes Kodak Patents
  • 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
    Rex 10/20/04 10:15:39 AM EDT

    It would take quite a bit to bankrupt IBM, but it doesn't take much to make Sun a proprietary platform. Sun believes that Java is not proprietary. And they believe that Solaris is an open operating system. If that's the case, why are they so vociferously competing against IBM and BEA based on charges of properitary infrastructure, and losing so much against Linux, which is truly open?

    Face it, McNealy - you're on a proprietary platform. Maybe not as much as Microsoft, but definitely moreso than Linux and even IBM's platform. Get real.

    Jason 10/19/04 05:24:58 PM EDT

    Does that mean that IBM is "proprietary" and Sun is "bankrupt?" :-)