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Sun Microsystems, Inc.
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By NorthCarolinaKen
March 18, 2003

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There is a mildly positive article on Sun in Barron's this week. It is interesting how your viewpoint changes the interpretation of the presented facts. Merrill Lynch did a survey of CIOs to get some forward view of Sun.

One question was: "Would you consider using Sun's Star Office." The answer was 74% no, 26% yes and was interpreted as negative. Microsoft is ahead. One can only laugh at that. These numbers open Champagne in Santa Clara and put a cold chill in Redmond. A quarter of the Enterprise PC software base is at risk? Are you kidding? Negative? The tech analysts still can't find their rearsides with both hands.

Another was on whether Sun is gaining or losing market share. If you broad brush the server situation, Sun is losing. Customers can't afford big projects and have them on hold. They are doing some smaller projects so the number of systems sold across the board sees business larger with dominant vendors of smaller systems. Does this mean that Sun is losing market share? Give me a break. IBM is also cited as a threat and they are more real. What is happening is not head to head competition. IBM doesn't do well against Sun mano a mano. The movement is outsourcing particularly with the new IBM plan where they say they have "infinite" resources but you only pay for what you need when you need it. This is mostly a budget driven phenomenon too but as investors we need to make a judgment as to whether it is temporary or not. My reading of customers, predominately in the trade press, is that most outfits are very selective on outsourcing and keep critical stuff in house. A few tried it and are pulling things back. I don't see a wipeout here but this is real competition. I think there is a point of diminishing returns in there some place, not a wipe out.

Frankly, I don't have much use for Merrill's Steve Milunovich's views but he has a memorable comment in this article: "I've been tempted to give up on them, but I just can't do it. Their vision is very good. They have a deep understanding of the problems."

Part of that was McNealy's comments about IBM. The way to solve the customers' problems is through technical innovation, not throwing outsourcing bodies at them. Hard to argue with that.

Ken


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