Sun job cuts and Linux on Sparc will fail says analyst

Stan Beer
Thursday, 01 June 2006 10:39

IT Industry - Strategy

The announcement that Sun Microsystems is going to slash 5,000 jobs from its workforce is hardly a surprise. Coupled with yesterday's announcement that the UltraSPARC T1 processor on Sun Fire T1000 and T2000 servers will run Ubuntu Linux, the job cuts show a desperate effort by Sun to bring itself back to profitablility. It's an effort that will fail, according to a leading Sun analyst.

Sun's recently appointed CEO, Jonathan Schwartz, has made no secret that he wants to reinvent the company's technology focus and business model.

However, long time Sun watcher Dr Kevin McIsaac, a senior analyst from research group IBRS believes Sun's moves are too little and too late. The former Meta Group senior analyst is renowned for heading a team which in 2001 delivered a report to Sun founder Scott McNealy titled "Sun is the Next Digital Unless."

Dr McIsaac says, "Job cutting is all about realigning your costs to your finances. It may or may not be an indication that a company is struggling. In the case of Sun, we have seen that its revenues have not increased over the last four years and they have not been profitable. This is just another indication of Sun's malaise. I wouldn't take it as either a good sign or an omen that the end is near. However, it depends where they're cutting the jobs. If they're slashing them out of the sales force that can have consequences on deal size. If they're taking them out of research then that flies in the face of what Jonathan (Schwartz) says about maintaining research which is the core of the company's reason for being."

According to Dr McIsaac, the job cuts are at best a short term fix. He is also sceptical of Sun's recently announced move to put Linux on its Sparc platform.

He says, "People seem to be very excited about Linux on Sparc," says Dr McIsaac. "However, frankly, off of Intel, no Linux has been widely successful. It's been on mainframes for six or seven years. It's been on PowerPC for a long time. It hasn't changed things for those two platforms. Linux is really about a commodity operating system on a commodity platform. It was really Sun's failure in the late 1990s to put Solaris on Intel which will really enabled Linux to get into the data centre. Now people just don't care because what they really want to buy is commodity servers. Commodity means low cost and high volume and for that people have traditionally bought Intel. In short, three years down the track Linux on Sparc, like Suse Linux on mainframes, will be considered just another interesting Linux diversion."

Dr McIsaac says that taken by itself 5,000 job cuts mean little. However, when combined with other events at Sun, things do not look good for the hardware company. "One round of cuts doesn't make a disaster. But if you put that together with flat revenues year after year, the commoditisation of the market, and a lack of strategies that show how Sun is going to increase revenue or profitability, means more of the same - flat revenues and low profitability."