Sun Micro: Corner Turned in Asia, with China's Help
Thu May 16, 8:25 AM ET
By Edwin Chan
SHANGHAI (Reuters) - Sun Microsystems, which has been fighting for months to grab a larger share of shrinking spending on information technology, says it has finally turned the corner in Asia.
After a dismal year for tech firms when Sun struggled to move its servers, even in booming China, the U.S. maker of high-end computers that run corporate networks expects sales to rise over the rest of 2002, a senior executive said on Thursday.
Things are looking brighter for Sun virtually across the region from China, Sun's second-biggest Asian market, to Southeast Asia and Australia, said Jay Puri, Sun's U.S.-based Asia-Pacific vice president.
To add icing on the cake, Puri said Sun is beginning to pick up customers from Hewlett Packard (news - web sites) as the U.S. computer giant merges with former rival Compaq (news - web sites).
"Particularly this quarter in Asia, I'm starting to sense that the overall climate is strengthening, the size of deals are increasing, and the pipeline is looking better," Puri told Reuters in an interview on the sidelines of a Sun-sponsored seminar.
"Japan is the only geography (for us) that is in a little bit of a downturn," he said.
Quickening activity may not translate into actual business until the next one or two quarters, Puri said.
Perched comfortably on a sofa in his 25th floor hotel suite overlooking Shanghai's bustling financial district, he said Sun and other IT vendors are zeroing in on China, which accounts for nearly a third of all spending on servers in the Asia-Pacific.
OPERATORS, START FOCUSING
Chinese firms are investing more on IT, even though their IT spending on average is just one percent of revenue compared with U.S. firms' 4-5 percent, he said. And the increasingly competitive telecoms sector also offers ample opportunities, Puri said.
"Obviously China is the brightest spot," he said. "As China becomes a global manufacturing powerhouse... the only way they can do that is by aggressively using IT to become more efficient."
"We never saw our business here decline that much."
Sun is also poised to ride an anticipated jump in China's network infrastructure spending in the medium term, Puri said.
China delayed part of a rapid infrastructure roll-out this year as it raced to complete a telecoms sector overhaul and break-up of its monopoly carrier, culminating on Thursday in the launch of two new operators, China Telecom and China Netcom.
The newly created competition means operators will soon have to start spending again, he said. Industry experts see renewed spending from the second half of 2002 to early 2003.
"The restructuring actually defocused the organization over the past few months and we did see a slowdown in our business," Puri said. "Now that it's been done, I'm hopeful that the spending will pick up... They need to invest to be competitive."
While a regional recovery bodes well for IT vendors, Sun may see gains from another source: the merger (news - web sites) between HP and Compaq.
Puri says HP and Compaq customers, worried that products they are using would be dropped by the new entity, have approached Sun to discuss switching loyalties.
"HP and Compaq combined means one less competitor for Sun," he said.
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