Memo to Sun’s New CEO: Make a Radical Move
It’s time for drastic measures at Sun Microsystems. Rather than developing integrated hardware and software solutions, newly installed CEO Jonathan Schwartz needs to make a dramatic decision: Bet the company on either hardware or software-but not both.
To really drive home the strategy, Sun should make an acquisition that rocks the IT landscape and engages the channel. My recommendation: Snap up either AMD (to focusing primarily on microprocessors) or Red Hat (to jump to the front of the open-source revolution).
Sure, those are radical, expensive recommendations. Red Hat’s market cap is roughly $5.35 billion; AMD’s hovers around $15.9 billion. Sun would have to pay a hefty market premium to swallow either player.
But these remain desperate times for Sun and its channel partners. That’s why co-founder Scott McNealy this week handed his CEO crown to Schwartz. We all know about Sun’s meteoric rise-and subsequent fall-developing Unix workstations and servers. Sun suffered a $217 million loss in its most recent quarter. Sun’s stock, which topped $60 in 2000, hasn’t exceeded $5 for five years, according to Forbes.
Investors, channel partners and customers deserve better.
Enter AMD and Red Hat. In the past year, many Global 2000 customers have quietly embraced AMD’s Opteron processors running Linux. By most accounts, Opteron is the best processor choice for running 32- and 64-bit applications in tandem. At the same time, more than 80 percent of Linux servers sold in North America run Red Hat Linux.
In essence, the market is telling Schwartz where to go: Bet the house on Linux and open-source applications, or transform the existing Sun/AMD partnership into a full-blown takeover. Either way, the channel wins: Despite the popularity of Dell’s direct sales model, the vast majority of industry standard servers are sold via solutions providers. Surely, Sun’s channel partners would welcome the opportunity to sell scalable, aggressively priced servers.
Armed with open source or AMD, Sun may yet rise again.