From Weds. WSJ, a not-very-interesting reprint of an interview with McNealy that took place in Germany a couple of weeks ago.
--QS
Sun's McNealy Sees IT Slump
As an Opportunity to Reintegrate
SIGRUN SCHUBERT
HANDELSBLATT
Sun Microsystems Inc. founder and Chief Executive Officer Scott McNealy is known for his competitiveness, his golf skills and his staunch optimism, the last of which he needs now more than ever. Last week, his company reacted to the lingering downturn by lowering its targets for the current quarter. But the company has seen tough times before. Sun was founded in 1982, in the midst of a similar slump.
Mr. McNealy, never one to pull punches when it comes to rival Microsoft Corp., is using his outspokenness to call for more reintegration of hardware and software development and focus the industry on the new need for secure digital identities. This interview was conducted prior to Sun's recent earnings forecast adjustment and has been adapted from an edited German transcript published in Handelsblatt.
How long before the information-technology sector recovers?
I don't like to make predictions. There are always droughts and floods. No one knows what the next big innovation will be to drive up demand for computer capacity. There's always been a motor every few years, there was always some invention. And there'll be another one. The attacks of Sept. 11 changed the world. Everywhere I look now, there are more and more cameras, scanners and sensors. Those will allow for the use of data analysis to conduct investigations or predict attacks.
Has the crisis in the IT sector slowed down innovation?
No. On the contrary. Innovation has accelerated since. Although people are working on fewer ideas, the ideas are more thought through. A lot of Internet companies were sheer wastes of energy. The work the people did in the companies that went bust has largely disappeared. Now, the chance is greater that the work being done will actually see the light of day.
Does Sun want to compete with Microsoft in software?
Sun always employed more programmers than hardware engineers. That's nothing new. After all, in just about every technical device, every handset, every car, there's more software than hardware. The awful separation of software and hardware exists only in the case of computers -- and that only since Microsoft came along and introduced the split. And what have we gained from it? The computer is the only technical device that we think is complicated, because software and hardware are not integrated.
The market seems to have decided in favor of Microsoft. Software scores high profit margins, whereas hardware suffers from pressure on prices.
That pressure is increasing for software too, not least due to the no cost operating system Linux. Plus, the distribution costs for software are next to nothing, so prices can still fall.
Will the downturn force Sun to shift strategy?
No. We're not changing our strategy. The heart of the network is still the computer. But it is right that we are expanding our perspectives. We're working to integrate hardware, software and Web services to provide access to the Internet from everywhere. That's not easy. We're investing $2 billion a year in research and development and have one of the 25 biggest R&D divisions in the world. That's not a shift in strategy, it's an evolution.
Who's buying technology now?
The market has changed completely. Two years ago, we were focused entirely on Internet providers, dot-coms, telecommunication firms and financial-services companies. Over 60% of our revenues came from those areas. Now those markets are as good as gone. We've reoriented ourselves and we're now focused on retail, health care, education and government agencies.
Sun has been criticized for being too slow to introduce a Web-services strategy. Is Sun ONE a reaction to Microsoft's .NET strategy?
I see it the other way around. With the programming language Java, we've been active in Web services for a long time. What do think would happen if Microsoft Web Service disappeared from the market overnight? Absolutely nothing.
What role will online personal-identification systems play?
That's the next big battlefield. Between IT executives in the U.S., there's a sort of sporting competition: Whoever has the most toys, cars, private jets and yachts wins. Oracle CEO Larry Ellison is the clear winner, Bill Gates doesn't even come close. I've changed the rules of the game somewhat: I think the one with the most wealthy or smart people in his databank who he can then offer his customers is the winner. The goal is to get all customers, suppliers, employees, shareholders, distributors and even technical devices such as cars and handsets online. All this information can then be managed, controlled and updated on the Internet. I believe digital identity will be a big thing.
In which areas is further innovation needed?
I would love to see handsets on all continents hooked into the same network. Wouldn't that be great? For that, we need really good identification software, both online and off. I'm often asked to show my ID and I just use my company badge. But that could be forged. To be really sure, we need several stages of identification for buildings and airports. Instead of just a photo, people should have to pass through three stages of identification: proof of who someone is, what they know, and what they have. A photo, a password and a fingerprint. That would be real identification.
Do you think the antitrust case against Microsoft has changed the industry?
No, not yet. U.S. Judge Kollar Kotelly, European Union Commissioner Mario Monti or Germany's state attorneys have to buck up and do something. Microsoft's behavior is now more infuriating than ever. |
