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Sun Micro Tests New Water with Linux Computer
Mon Aug 12, 7:06 PM ET
By Peter Henderson
SAN FRANCISCO (Reuters) - Sun Microsystems Inc. on Monday unveiled its first general-purpose computer running the free Linux ( news - web sites) operating system in what is seen as a turning point for the company and a potential threat to it.
Sun is best known for million-dollar computer servers running its Solaris operating system software that powered dot-com companies during the Internet boom years.
But with the tiny new two-microchip machines running Linux, Sun is entering the market for inexpensive servers using commodity microchips and parts, a new game.
Chief Executive Scott McNealy said Sun could produce Linux machines as cheap as PC vendor Dell Computer Corp. and that Linux was key to stopping the encroachment of Microsoft Corp.'s Windows operating system.
"The enemy of my enemy is my friend, and I hate Microsoft," he told reporters at the launch, explaining that Sun had been a long-time Linux supporter. That is not the popular perception of Sun, which always touts its own technology.
Some industry watchers also think that the new Linux machines may undermine Sun's own Solaris operating system, but others aren't so sure.
Financial analysts noted that Solaris is engineered for security, reliability and to run on high-end machines, which Linux is not yet able to do as well.
Sun argues Solaris and Linux can develop and coexist under the umbrella of Sun's middleware software, which binds networks together and acts as an operating system for the network.
Corporations are increasingly turning to Linux for simple jobs like managing printing and Internet connections.
Sun executives also said they would unveil plans for client computing at a conference it plans for Sept. 18-20. That could mean a competitor to a Windows PC that would run Linux and Sun's StarOffice suite of Microsoft Office-like products.
LOW-END, LOW PROFIT
International Data Corp analyst Jean Bozman said that Sun had about 40 percent of the market for entry-level servers costing up to $100,000 running the Unix ( news - web sites) operating system and that Linux gave it many more potential customers.
But profit margins would suffer, she and others said, because the margins for the high-end machines are wide, whereas in the low-end market margins can be razor thin.
"They pretty much made the decision that is more important to keep the customer than to maintain the (profit) margins," said First Albany Corp. analyst Walter Winnitzki, who does not own Sun stock and whose company does not do business with Sun.
The company's profit margins shrank in the June-ending quarter in what Wall Street took as a bad sign.
Executives at a Sun news conference to introduce the new computers said the profit margins on the Linux machines would be similar to those of its other volume-market models, and McNealy told reporters profits and cash flow were more important than margins.
Sun's new LX50 computer holds up to two Pentium III microchips from Intel Corp. , runs a Sun version of Linux and will start at a price of $2,795.
Sun already uses Linux on low-end special-purpose servers, but those do not have the flexibility to compete with its main product line, analyst have said.
Sun's rivals hope Linux will eviscerate Sun's high-profit business for bigger machines as it becomes more powerful.
Sun's software efforts have languished in the past, overshadowed by its powerful computers, but the company recently has brought middleware to center stage and said the new machine is part of that strategy.
The new commodity machine will run Solaris as well as Linux, and executives said they would move version 9, the latest, to the Intel chips within two quarters. |
