To Thread: From SmartMoney.com
August 3, 1999
Sun Worshipers
By Alec Appelbaum
PRODIGAL SUN
JUDGING from the ecstatic coverage in Monday's news, you'd think Sun Microsystems' (SUNW) new innovation in chip design could create 3-D graphics, aid the mass production of multimedia communications devices and cure male-pattern baldness. The news bumped Sun shares up 2.3%, while the rest of the Nasdaq dropped 15 points
In fact, Sun hasn't locked up a new market. But it has opened the door to hungry media, retail and electronics companies -- and developed a promising, new computing system to make itself indispensable to them. The chip design Sun announced on Monday, called MAJC (that's Microprocessor Architecture for Java Communications -- get it?) allows chipmakers to jack up the processing power of each chip they install. With these juiced chips, devices ranging from boxes on TV sets to terminals in operating rooms could read, store and display 3-D data without choking on the complexities of words and pictures. The chip design provides a lot more power than what current PCs need for word processing, spreadsheet creation and most Web surfing. Sun spokesman Russell Castronovo said it's intended to seed a generation of "information appliances" the likes of which we haven't yet seen.
Though scribes are already calling MAJC a "chip," its whole value rests in the fact that it's actually a system for designing chips. MAJC enables manufacturers to put more than one microprocessor on a single die. The microprocessor is a computing brain; the die is more like a skull. By making side-by-side brains possible, Sun has created a system that could yield devices with enormous processing power. What's more, Castronovo says, the chip that Sun is working on will process information in a "different way" than traditional chips have done.
Wouldn't you like to know what that is? So would we. We'll just have to wait two weeks for more details on the design, said Castronovo, and we'll get to see Sun's first chip based on the design in October in Palo Alto. Without knowing how the new chip design will grind out information, or whom Sun will choose as partners in marketing chips based on the design, we can't view the MAJC project as a clarion call for new Sun investors. But the upside appears to outweigh the downside, once you understand how the innovation expands Sun's business opportunities.
The real focus here is on processing lots of streaming audio and video. That means that Sun is focusing on a new class of customers -- not trying to challenge Intel's (INTC) domination of the PC chip market (at least not right now) or undermining its own chips for servers. "We have a processor doing dynamite in existing data chunks," says Castronovo. The new processor design aims to handle data chunks that aren't made of letters or numbers -- and, not coincidentally, to encourage software developers to write applications using Sun's Java language.
One of the things that makes Java percolate is that it sends more than one option, or "thread," to a computer user at once. Industry analyst Tom Halfhill of Cahners' Micro Design Resources says the new chip design encourages experimentation with this multiple-command language. "You could have one [chip] that displays graphics, another that decodes streaming audio and video, another that prints something. If you're writing in Java, it's [already] almost too easy to write more threads. I've done that sometimes myself."
The MAJC design can also read other computer languages, so this isn't Sun's attempt to bake its programming language into the hardware at the exclusion of other languages. But Castronovo says there are already 500,000 people writing programs with Java who need a platform to make their programs efficient. That's one side of the MAJC opportunity. The other side is harder to picture -- the customers and the machines they'll build with the technology.
"We have partners in mind," says Castronovo, but the chip probably won't show up in commercial devices until next year. Halfhill projects the following scenario: Sun will debut its version of the chip in October, then will license the chip architecture to chipmakers such as Texas Instruments (TXN), which would sell chips to big electronics companies like Sony (SNE). Castronovo won't say whether Sun plans to license the design to other manufacturers, but Sun has done so with previous innovations.
Now, what makes us bullish about the MAJC project is not simply its potency, but its versatility. As Halfhill explains, it could guide the creation of low-power chips for cell phones or higher-order chips, with lots of processors, for some future incarnation of the PC. Big companies from Sony to Time Warner (TWX) to America Online (AOL) have made no secret of their thirst for the low marginal costs and high consumer awareness that home-based shopping seems to promise. And analysts see these companies -- and their advertisers -- paying up to show 3-D graphics of their wares and to make their Web pages materialize before viewers get distracted. "If a page takes too long to download, it is as if we have run out of the store before any clerk gets a chance to help us," says Tom Dwyer, a Java analyst with the Aberdeen Group.
It doesn't seem to bother analysts that the Web-TV hybrid to which MAJC seems to lend itself currently serves less than 1% of the population. It's all about impulse buys, Halfhill says. "The companies that I picture being successful in all this would be like Sony and Microsoft (MSFT), companies that understand the consumer market and already have a presence in the living room." Castronovo argues that other businesses would buy computing devices with 3-D processing if they could afford them -- doctors, videoconference hosts, mapping companies and so on. MAJC can reduce costs by putting multiple processors on a single chip, saving valuable silicon, and by its still-undisclosed processing method.
We can't call Sun stock a reinvented property until we know more about who will embrace and build around the architecture. Diba, an appliance designer that Sun bought on the cheap two years ago, may play a role; archrivals Microsoft and Intel will almost certainly push their own multimedia solutions. But by designing a blueprint for a form of e-commerce that consumer and electronics companies desperately want to create, Sun is putting itself at the center of a free-spending universe.
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