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Issue Date: March 2003 (es)

Sun on Linux: What, me worry?

1 March 2003

When Sun Microsystems got started in 1982, companies like Wang and Data General dominated the hardware business. In less than a decade, this upstart Unix outfit was a billion dollar-plus phenom while the once-mighty minicomputer makers had been consigned to irrelevance.
Such is the impact of what Harvard Business School professor Clayton Christensen calls a disruptive technology. Sun, which won IT converts by offering minicomputer customers less expensive and less proprietary systems, had come up with a technology-price recipe that the incumbents could not match.
How times have changed nearly two decades later, with Sun now the one scrambling to remain relevant. As the Unix server market continues to shrink, sales of Intel-based servers running the Linux operating system nearly doubled in the fourth quarter of 2002 from a year earlier.
For the record, Sun's brass is quick to dismiss this as only a minor concern.
Sun is not standing still. The company has ambitious plans to build more speed and functionality into Solaris while committing to using 32-bit Intel processors. In the meantime, the company also is filling out its product portfolio for managing data centres with a single, unified system under its recently announced NI initiative.
"Am I worried about Linux?" says Jonathan Schwartz, the savvy executive who runs Sun's software group. "No. Am I worried about Intel? A little."
Maybe he should take another look.
Lintel - Linux on Intel
Rivals are selling gobs of Intel-based hardware running the Linux operating system. The pitch is that Linux on Intel is a less expensive and more open alternative to anything in the Sun technology arsenal. Even though Linux does not yet feature any special technological advantage over Sun's Solaris operating system, it is the fruit of open-source collaboration and thus does not belong to any single company.
Sun argues all this is misleading advertising because of the hidden costs of ownership associated with building sophisticated data centres. When pricing Linux systems, customers cannot ignore the cost of additional software they must buy to run on top of Linux. Sun also points out that it throws much of that into the package that comes with its own Solaris operating system.
Those are fair points, but consider the following year-to-year comparisons from the recently concluded fourth quarter:
* IBM raked in $159,9 million in Linux-related sales, up from $75,6 million.

* Hewlett-Packard's share rose to $80,2 million, up 81% from $44,3 million.

* Dell Computer's Linux server revenue soared nearly 66%, to $77,1 million.

* Sun, which started selling Linux servers in 2002, finished with just $1,3 million in Linux revenue.
When measured against total IT expenditures on corporate data centres, those numbers are still relative drops in the bucket. But the Linux-on-Intel combination also allows Sun's rivals to beat it over the head on price.
For IBM, a commodity operating system like Linux is a godsend because it can afford to subsidise its commodity strategy with revenue from its software and services businesses. Similarly, Hewlett-Packard can count on its profitable printer business to offset the loss of margin elsewhere. (It also has a hardware line in the works that will run Linux top to bottom, unlike Sun. Linux is on Sparc if you want to do it yourself, but it is not popular.) And there is no company around that has been able to figure how to beat Dell at selling lower-end systems.
Struggling to revive its moribund stock price, the last thing Sun needs or wants right now is an even worse price war.
With prices on Linux-Intel systems falling, the pressure is on a 'higher value' company like Sun to justify the higher prices it charges for systems comprised of proprietary Unix operating systems on RISC processors. Corporate data managers are especially anxious about reducing hardware costs. What is more, they know the migration to Linux from an existing proprietary Unix platform re-uses a lot of the existing code and skills.
Sun's retort is that data centres do not throw away existing architectures. That answer is eerily reminiscent of what the minicomputer crowd said back in the early 1980s - just before Sun turned them into also-rans.
For more information contact Charlie Cooper, CNET,

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