Here is a Business Week article on their take on the impact Compaq/Digital will have on Sun
NOW, WHAT'S IN THE
FORECAST FOR SUN?
Scott G. McNealy, chief executive of Sun Microsystems Inc., loves to compare
the computer business to the auto industry: If you're not one of the top two or
three, he says, you're nowhere. Now, Compaq Computer Corp.'s planned
purchase of Digital Equipment Corp. suddenly vaults the PC maker into the top
trio of computer makers, along with IBM and Hewlett-Packard Co. What does
McNealy--whose father was once vice-chairman of also-ran American Motors
Corp.--have to say now?
Nothing. McNealy declined to comment, though his chief operating officer,
Edward J. Zander, says that as far as Sun is concerned, it's merely a chance to
raid Digital's customers and employees: ''This is IBM's and HP's problem more
than ours,'' he says. But some analysts and customers say that Sun, which only
recently joined computerdom's top-tier suppliers, had better pay closer attention.
If Compaq manages to swallow Digital without too much indigestion, they say,
McNealy could be the odd man out.
STUNTED GROWTH? Why? Unlike its chief rivals, Sun still makes computers
based solely on its own Unix operating software and its own microprocessor
chips. It's the only major computer maker without machines based on Intel
Corp.'s Pentium chips, and it's the only one still shunning Microsoft Corp.'s
Windows NT operating software. Contends Bruce L. Claflin, Digital's senior
vice-president for worldwide sales and marketing: ''[McNealy] has painted
himself into a corner.''
Sun can't afford that. According to market researcher International Data Corp.,
1997 sales of all Unix servers grew 9%, to $24.7 billion. But NT server sales
shot up 66%, to $6.1 billion. And early next year, the newest version of
Windows NT will present an even more direct challenge. Although NT still won't
match powerful Unix systems, it will make NT more competitive with Sun's
bread-and-butter midrange servers.
That's not Sun's only challenge. Buyers often rank Sun behind IBM, HP, and
DEC in service. With Digital, Compaq gains a large service organization and
more Windows NT support personnel than any of its rivals.
Not surprisingly, Sun dismisses any immediate impact from the merger. ''DEC has
tried more strategies than Heinz has flavors, and none of them has worked,'' says
Zander. ''We haven't had DEC on our radar screen in a long time.''
Zander isn't just whistling past the high-tech boneyard. The PC wolves haven't yet
gotten much past Sun's door. In its second quarter, ended on Dec. 28, Sun
reported better-than-expected earnings thanks to strong server sales. Indeed,
several observers think Sun could actually clean up for the next year or so, thanks
to Digital customers wary of what may happen. ''In the short term, it might add
some power to Sun,'' says Stuart Davie, information technology vice-president
for Pfizer Inc.'s orthopedic subsidiary, Howmedica, which uses Sun and Compaq
NT servers.
And Sun's not sitting idle. It's going on the offensive against PC makers on several
fronts. On Jan. 19, it introduced a $2,995 workstation aimed squarely at staving
off Compaq's PC business. And servers introduced last fall included
easier-to-use software designed to combat NT servers.
Still, Sun could find itself more isolated than ever. That's one reason the Silicon
Valley highflier is spending $30 million this year to take its message to the general
public--most recently with its first-ever Super Bowl advertisements. One ad,
poking fun at PCs' notorious unreliability, shows bank robbers who explain they
need all that money to pay for PC support. To stay ahead of Compaq, McNealy
will need big bucks, too.
By Robert D. Hof in San Mateo, Calif.
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