Sun acquisition to boost IT services portfolio
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Sun MicrosystemsÂ has agreed to purchase Ashburn, Virginia, IT services company SevenSpace, the companies announced Monday. With the purchase, Sun takes a further step away from its traditional focus on supporting only its Solaris operating system platform and beefs up its support for competing operating systems like Windows, HP-UX and AIX.
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Sun Microsystems Inc.&#39;s plan to give away the latest version of its Solaris operating system highlights the technology giant&#39;s bid to roll back the gains of Linux in the corporate technology market, analysts say.
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(InfoWorld) - Sun Microsystems, buoyed by its first profitable quarter in more than a year and a half, said Tuesday it has a goal of generating an operating margin of 10 percent by its 2009 fiscal year. Sun executives set the goal, though they cautioned that a lot of things have to happen in order to reach it, during a conference with analysts Tuesday in San Francisco. Sun CEO Jonathan Schwartz said increased adoption of Sun's freely-distributed Solaris operating system,Â its recently announced partnership with Intel, and other strategic moves, will help it grow revenue. At the same time, said Sun CFO Michael Lehman, the company will continue to reduce its cost structure using a number of levers, though not employee layoffs. "Our cost structure is still too high," Lehman said, "but we do not intend to have a big layoff and just lower the numbers." The company is going to reduce general and administrative expenses and research and development spending as a percentage of revenue so that those expenses provide a better return, he said. For example, Sun is converting its own business software infrastructure to standardize on Oracle's 11i bundle of enterprise resource planning software, including general ledger, payroll, andÂ CRM software. The conversion is expected to cost more than $200 million, Lehman said, but it will save Sun the expense of having to manage 1,000 different types of software throughout its company. "We have put a stake in the ground, and we are on a journey," Lehman said. Sun posted net income of $126 million, or $0.03 per share, on $3.566 billion in revenue, in its fiscal 2007 second quarter ended Dec. 31, 2006. It was Sun's first profitable quarter after five successive quarterly losses. Sun recorded an operating margin of 2.9 percent in the second quarter and forecasts a 4 percent operating margin in its fourth quarter. On the revenue side, Schwartz said the company's decision to give away its Solaris operating system and open source its Java software create opportunities for Sun to sell hardware and services to those users. Sun's recently announced deal with Intel to install Intel processors in its servers, while Intel markets Solaris, will also create new sales opportunities. "We are now fully outfitted to pursue 100 percent of the market. There is no opportunity that we are precluded from bidding on. There is no customer that we cannot serve," Schwartz said. Sun's turnaround strategy is finally showing up in its financials, said Nathan Brookwood, an industry analyst with Insight 64, a research firm. "You had to take it on faith a year ago." Sun previously only sold servers and workstations running its Sparc processors. Now, because it also uses Intel and AMD processors, it can appeal to broader markets, said Brookwood. "Three years ago if you wanted to buy hardware from Sun, you had to sign up for the Sparc religion. Some people believe in other religions, and they didn't want to have to do a religious conversion to buy from Sun," he said. Sun's operating margin goals seem "conservative" to Sun financial analyst Andrew Neff of Bear Stearns & Co. In a research note to investors, Neff, who also attended the conference, said "Sun has more work to do on costs, [but] we believe its outlook can further improve."
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Sun described on Wednesday a growth strategy that depends in large part on giving away software in the hope that customers will like it enough to sign up for support contracts and perhaps buy Sun hardware on which to run it.It&#39;s a strategy Sun started several years ago with a free version of its application server and that it has accelerated with such products&#160;as StarOffice, OpenSolaris, its Open xVM virtualization software, and, most recently,&#160;its acquisition of the open-source database vendor MySQL.The free software allows Sun to build communities of developers who will do pilot projects with its software and may eventually buy licenses for commercial deployment, or buy professional services to support critical applications, CEO and President Jonathan Schwartz said at the company&#39;s press day Wednesday. He called Sun&#39;s software a &quot;media asset&quot; for building communities.&quot;These are no longer simply software products, these are media properties -- networks around which communities are being built, [and] this is a means for Sun to talk to a very large developer community,&quot; he said.He put up a slide that showed a map of the world covered in pink dots. Each dot represented a download of Solaris, he said, and hence an opportunity for Sun to start a dialogue with IT people that could lead to a sale of its services and hardware.&quot;Not all customers will pay for these products before they use them -- very few will, actually,&quot; he admitted. But they all buy servers and storage on which to run the software, and the download gives Sun a foot in the door to try to capture that sale.&quot;The reason MySQL was interesting to us is it puts 50,000 new dots on that map every day, and from the community, market opportunities will emerge,&quot; Schwartz said.Sun&#39;s growth is important to customers. Its revenue funds its research and development efforts, and customers want to know there is a big community of specialists in Sun products to support their businesses.Analysts are divided about the strategy. At Sun&#39;s financial analyst conference last week, Sanford Bernstein analyst Toni Sacconaghi said he found it hard to see a link between software downloads and Sun&#39;s revenue growth.&quot;If you were to plot a chart showing revenue growth over the last 12 quarters and Solaris downloads, there would really be no correlation at all,&quot; Sacconaghi said.&quot;Oh, I think there would be an exceptional correlation,&quot; Schwartz replied. &quot;If you had shut those downloads off three years ago, our revenue would have been declining double-digit.&quot;He reiterated the point Wednesday. Sun&#39;s strongest growth period came in the late 1990s and was preceded by wide use of its software in universities, he said. Today, the growth of Sun&#39;s Niagara servers has been driven by making Solaris open source, Schwartz said.Illuminata analyst Gordon Haff said there probably is a connection between Sun&#39;s free and open-source software strategy and its revenue growth, but even if there is not, the strategy is helping the company, he said.&quot;Even if you can&#39;t say that each pink dot equals $372, I think the things Sun has been doing with open source and OpenSolaris and Java and so forth have translated into improved relevancy and an improved perception of Sun, and at some level, logic suggests that this played a role in their improved financial picture.&quot;
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Sun Microsystems Inc.  is revamping its Solaris operating system, incorporating key pieces of rival Linux software in a move that could gain better support from developers who have massed behind Linux.
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Sun Microsystems has signed a deal to acquire SevenSpace, a company whose technology is expected to expand Sun&#39;s remote-management services beyond what&#39;s possible with the computing giant&#39;s own equipment.
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Sun Microsystems Inc. and Microsoft Corp. next month plan to provide more details on work they are doing to make their products interoperable, a Sun executive said Monday.
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A Sun Microsystems executive said the $13 billion technology company should be able to handle a possible slowdown in information technology (IT) spending better than some of its larger rivals.ADVERTISEMENTNEW IT SERVICES FROM IBM: EASIER TO BUY AND IMPLEMENTDiscover a simpler, more cost-effective way to get the solutions your company needs to grow more flexible and efficient.
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The European market is hot, so the solar technology company plans to expand there.
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More large acquisitions may be in the software giant's future.
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Sun described on Wednesday a growth strategy that depends in large part on giving away software in the hope that customers will like it enough to sign up for support contracts and perhaps buy Sun hardware on which to run it.
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newsmaker Greg Papadopoulos, Sun's chief technology officer, foresees large-scale consolidation in computing services.
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The two companies are targeting customers that have invested in a services-oriented architecture.
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Sun Microsystems will hold its quarterly product launch this week, unleashing a raft of new hardware offerings spanning servers to storage.
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Increased adoption of Sun's freely distributed Solaris operating system, its recently announced partnership with Intel and other strategic moves  will help the company grow revenue, Sun executives said.
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Sun Microsystems has entered into an agreement to acquire SevenSpace, a privately-held company based in Ashburn, Va. SevenSpace will broaden Sun&#39;s Managed Services offerings to include heterogeneous environments
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The company sees its future in helping businesses migrate their IT systems to more flexible, SOA-enabled infrastructures; more details about the strategy are expected next month.