Sun Fights Back With Chip And SoftwareSun Fights Back With Chip And Software

With doubters continuing to raise questions about its long-term prospects, Sun Microsystems last week tried to convince financial and industry analysts that it's still a leader in technology by revealing strategies to revamp its microprocessor lineup and Solaris operating system. At its annual analysts conference, the company said it's developing a next-generation UltraSparc processor that can read multiple threads of information simultaneously and improve application performance on its servers.

Meanwhile, Sun continues to integrate all its software products into Solaris and will begin offering customers within the next 12 months the choice of paying for software based on a flat annual fee, a variable utility-type fee, or the more traditional model of per CPU or per user.

Sun faces increased competition in all parts of its business from Intel's 64-bit Itanium processor line and the growth of Linux as a data-center operating system. To counter the perception that its glory days are past, Sun needs to show that it can close the price gap between its products and those based on Intel's architecture, says Kim Ross, CIO of Nielsen Media Research. "We like Solaris, and we'd rather not be pulled down to that other model," Ross says. "But the initial price/performance comparison for Intel has been compelling."

To keep customers such as Nielsen, Sun last week introduced its Throughput Computing strategy, which will use chip designs from its recent acquisition of Afara Websystems Inc. to produce over the next two years UltraSparc processors that can perform 15 times faster than today's UltraSparc IIi processor. Looking beyond 2005, the company plans to ship chips that can provide up to 30 times the system performance available today on the new UltraSparc III Cu.

"Sun really has let Intel control the message in the processor market," says John Enck, a Gartner VP and research director. "It's good to see them talking back."

Sun also outlined its Project Orion initiative, an integrated software package that initially will include the Sun Open Network Environment. Sun One consists of a directory server, an identity server, an application server, a portal server, and messaging and provisioning software. The company will later add clustering and storage-management software. Sun didn't provide a firm delivery date for either the availability of a fully integrated software product or its usage-based pricing model.

A company with 20,000 employees could expect the cost of the integrated software to be only 10% of what it is to purchase, implement, and integrate the individual apps, Sun says. By cutting such costs, Sun hopes to compete against Microsoft in the small- and midsize-business software market. "In Solaris, we include bundled software," says Andy Ingram, VP of marketing for Sun's processor and network products group. "You start adding up the cost of Intel hardware and software, and you see a better cost comparison because Sun bundles everything together."

Sun executives say their software will cost half the price of Microsoft's and that they'll be able to make additional profits on the sale of hardware products as they attempt to gain share among smaller companies -- a new market for Sun.

The attention Sun garnered from its various processor and software announcements last week is a good sign, analysts say. But the company is hedging its bets on Sparc and Solaris by announcing lower-cost Intel-based products that run Linux. "There's no silver bullet for Sun," Enck says. "It's going to be very difficult for Sun to win new customers on the Sparc and Solaris architecture."