Sun Microsystems Moving In The Right Direction

Sun's gains are partly the result of strategies initiated more than four years ago, when the company began developing the UltraSparc T1. Sun's ability to deliver high performance while reducing power consumption is what appealed to David Schairer, CTO of Concentric, a hosted application service provider that recently moved to the UltraSparc T1-based T2000 servers. The UltraSparc T1 comes with up to eight processor cores, each with four independent threads, providing a total of 32 processing elements per processor. Sun plans a second-generation UltraSparc T1 that will have eight cores with eight threads each.

The telecom industry is another key proving ground for Sun. The Netra T2000 is based on Sun's UltraSparc T1 servers, which have generated more than $100 million in revenue since they were introduced a year ago. The Netra T2000 is a "mirror image" of the standard T2000, with certifications to meet telecom requirements.

Shortly after Sun began developing UltraSparc T1, it launched a broad line of x86 servers using AMD chips. Sun's future may hinge more on AMD's processor technology than its own, though Sparc systems continue to account for about 90% of the company's server sales. Some customers still view UltraSparc as too pricey. In the past few years, Sun has seen some of its Wall Street customers migrate to commodity Linux servers from other vendors. Sun has been fighting back with its Opteron line.

Intel's introduction of the Woodcrest platform for one- and two-processor servers pushed Intel back into x86 performance leadership, according to some benchmarks. AMD answered recently with Rev F versions of its Opteron processors that increase performance using so-called Double Data Rate 2 memory and built-in virtualization. Graham Lovell, senior director of Sun x64 systems, says the company just began shipping one- and two-processor servers using the Rev F and will extend its use to all its x86-based servers through the remainder of the year.

Oh, Those Financials
While business is looking up for Sun, its financials are still lackluster. The company reported 18% higher revenue for the fiscal year ended June 30, but it posted a net loss of $864 million for the year and $301 million for the fourth quarter. Restructuring and acquisition costs were partly to blame.

The balancing act of reducing costs versus funding innovation goes on. Sun expects to cut up to 5,000 jobs in fiscal 2007, which began in July. Schwartz, in his blog, writes that cutting corners on components and selling lower-priced products don't "matter as much as delivering value and innovation."

Too many IT buyers still think of Sun as the high-priced alternative--even as it sheds the proprietary label. Perceptions die hard.