A Jolt of Java
Sun Microsystems' boy wonder grows up and even makes peace with Microsoft
Computing power. He of the silver tongue has a grand title for today's new Web-based business climate--"The Participation Age." Three million new users worldwide jump on the Web each week, using services that allow them not only to absorb new information--so last century--but to actively participate in the way content is created, from podcasting to blogging to voice-over-IP. "Three hundred thousand folks have a professional career eBay-ing," says McNealy. "Who'd have thunk?" As that network continues to expand, he maintains, there has never been a better time to be in the business of building out Web infrastructure. "The bigger the network, the more we sell," he wrote recently. If Yahoo! wants to compete with Google by, say, increasing the amount of storage space on its E-mail system, it will need more computing power to do so.
Which, in theory anyway, is where Sun comes in. The problem, though, is that the company has been losing ground of late in all three of its major businesses: in servers, to rivals HP, IBM,and Dell, which have offered cheaper products; in microprocessors, to Intel and Advanced Micro Devices, whose chips have been more popular; and in operating systems, to Linux, which companies have been able to download free. Sun hasn't made a profit since 2001. Last quarter, the company brought in $2.7 billion in revenues but still posted a net loss of $123 million.
McNealy, though, thinks he's found a way out of the quagmire. Ignoring his critics, he has stubbornly kept his research-and-development budget at its bubble-era level--and may be starting, finally, to see the payoff. In December, Sun unveiled an entirely new line of servers, the T1000 and T2000, which Sun executives say are five times as powerful, one-fourth the size, and consume one-fifth the power of competing machines--and, just as important, cost less, too. They are powered by a new chip called the UltraSPARC T1, which the company hails as "the world's first eco-responsible processor," and which runs on a mind-boggling 70 watts of electricity--about as much as a light bulb. Good news, says McNealy, for big Web companies like Google and Yahoo! whose second-largest operating expense--after paying their employees--is often electricity. Customers are already raving about the new hardware. "It was great to see them roll that thing out,"says Larry Lozon, vice president of data center services at Electronic Data Systems, a global IT services firm. EDS beta-tested the new Sun servers a year ago, and Lozon insists the technology is legit: His old servers required 5,000 watts to operate, whereas the new Sun boxes use only 800. Still, "from everything we could see, the performance is maintained, if not increased," he says. Multiply electrical-bill savings alone over the 80,000-some servers EDS has in data centers across the world, and "the power implications on those kinds of numbers are really, really big."
Analysts have tried not to be swept away by the hype. "They're learning their lesson: Entry-level prices--that was what was killing them," says Yankee Group's Laura DiDio. Indeed, at just under $3,000, the Sun Fire T1000 is actually cheaper than the competition, an obvious nod to Sun's shrinking market share. (Sun now has around 30 percent of the revenue in the Unix server market, slightly less than both IBM and HP.) But while no one seems to doubt that McNealy's new eco-friendly angle will have legs, most analysts refuse to be baited by what they say is, in the end, still just a product announcement. "Certainly, the initial numbers are impressive," says Gordon Haff, an analyst at Illuminata. Before declaring Sun resurgent, though, "we need to see eBay buying thousands of these; we need to see Google buying thousands of these."(Neither company wanted to comment on its purchasing plans. Sun, meanwhile, says more than 100 customers, including EDS, have already agreed to buy the servers.)
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