Sun on the Ropes
fortune.com
o [Sun has encountered trouble before] But this time seems different. The past year wasn't just bad. It was the worst in company history. Revenues fell by nearly 50%; Sun lost money for the first time in a decade; it laid off employees for the first time ever; and its once lofty stock price fell a heart-stopping 73%.
o The upshot is that Sun is going to have to reinvent itself, something it has never had to do before on such a scale.
o Put simply, Sun has to figure out what kind of company it's going to be when it grows up, and it's not clear McNealy & Co. have thought that through very carefully. Their continued cockiness in the face of mounting problems looks juvenile and worrisome to customers and shareholders.
o To understand how nasty things have gotten for Sun, just open a newspaper. Energy trader Enron, Internet service provider Excite@Home, and Web-hosting company Exodus all were big Sun customers. ... Think about how many penny-pinching customers it will take simply to replace Enron, which two years ago agreed to buy $350 million in Sun gear by the end of 2004.
o Sun salesmen also face the unenviable task of trying to sell new equipment in a market flooded with almost-new equipment. Most of Sun's dot-com customers and a few big telecom clients didn't just file for bankruptcy reorganization. They liquidated, putting hundreds of millions of dollars of Sun servers on the auction block, typically for less than 50 cents on the dollar.
o Any company that could come up with an invention powerful enough to make Microsoft sweat must be smart, the thinking went. "It got us in a lot of doors," a former employee recalls. "The gear pretty much sold itself."
o It has laid off 9% of its work force--or 4,300 employees. And it is broadening its sales efforts to include the health-care, retailing, manufacturing, and government sectors.
o Since Sept. 11, the company has also emphasized its security business, pushing Java smart cards--credit cards with a computer chip.
o Besides, even if it were just a matter of execution, as Zander says, Sun's record on that front has been less than stellar. Take web services. McNealy says that Sun invented the idea and that the only thing Microsoft has done better is market it. But since when is being outmarketed something to be proud of--particularly when you invented the thing?
o The company's record in the storage and application server market is even worse.
o Ultimately, for Sun to succeed, a radical change in the way its employees think is in order, and right now it doesn't look as if McNealy and his team are even close to pulling that off.
o There's another thing that probably has to go--McNealy's obsession with Microsoft. It's no longer clear that customers, even Sun's best, want to hear how evil Bill Gates is.
Link: fortune.com |
