Could Sun shine through Apple’s glass ceiling?

David Braue
3 November, 2008
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I met Scott McNealy once, during a visit to Canberra around the beginning of the decade.

There he was, the founder of Sun Microsystems and its CEO for over two decades, rolled out the red carpet by Australia’s business community and addressing a who’s-who of Australian business and media during an address at the National Press Club. He was treated with the enthusiasm reserved for royalty – and, in a sense, he was, as head of the self-proclaimed ‘dot in dot-com’ that was running some massive portion of the Internet.

Charismatic, visionary, mega-rich – he embodied everything the new breed of dot-com entrepreneurs wanted to be (this, it’s worth mentioning, was before the iPod and Mac OS X had even been released and in the days when Steve Jobs was still mapping tentative steps to recover from the water-treading of the late 1990s).

One wonders what McNealy – who retired in 2006 – would think of the company now. This week, Sun hinted at quarterly results, which will be confirmed this week, that suggest his baby is in serious trouble: revenues are down around 10 percent year-on-year; its share price is 20 percent of its 52-week high and less than half what it was just two months ago; and its market capitalisation is just $US3.46 billion, a pale shadow of the valuations that characterised the company during its heyday.

The market’s shift away from high-end, proprietary servers has taken its toll on Sun, which has a great product line and a long history of innovation but has been forced to cut its own throat, proverbially, to stay relevant in a market that has come to favour commodity Intel-based servers over Sun’s SPARC-powered powerhouse systems.

Sun’s Java programming language – so fundamental to the company’s identity that its sharemarket identity is JAVA – is ubiquitous but hardly a revenue spinner. It has open-sourced and given its rock-solid Solaris operating system away for free, but is still losing market share to Linux. Its thin-client Sun Ray terminals were a great idea before their time.

In short, Sun is a company with lots of good ideas but plenty of pain in the execution. Its latest figures just confirm what industry watchers have now known for years, but would never have predicted on that crisp autumn day all those years ago: that Sun is just not going to come out of its slow death spiral.

If you’re wondering why I’m rambling on about Sun on a site dedicated to all things Mac, here’s the deal: Sun is hurting, and it needs a new direction. Apple is doing well, but needs some fresh ideas rather than relying on interminable refreshes of its core products. Apple has tens of billions of cash in the bank, which puts it in a better position than most companies – and even many countries.

Why, then, would Apple not take the plunge and purchase either a controlling interest in Sun, or just buy the company outright?

I’m hardly the first one to suggest such a match, and Sun apparently tried to buy Apple in the past but was rebuffed several times. Many industry watchers wish the two companies would just get a room and get on with it, but the tables could ironically now be turned as the current gutting of the sharemarket – and Apple’s continued string of record results – suggests that there may be no better time than now for Apple to finally take the plunge.

Consider the possibilities: Apple, which has already launched forays into areas such as grid computing, enterprise servers and storage, would get access to a truly enterprise-class array of technologies that reach from one end of the big-business world to the other.

Apple would gain access to core Java functionality that would strengthen its credentials in Web 2.0-era application delivery; high-end storage systems that could easily be adapted to work seamlessly with technologies like Time Machine backup, which Apple has been perfecting and which would be invaluable in a corporate environment; and, of course, servers – all the way from entry-level commodity systems up to parallel-computing behemoths with dozens of processors and computing cycles to burn.

If Apple didn’t want to get into running nuclear testing facilities at Sandia Laboratories or similar facilities just yet, it could spin off the high-end servers business into a separate company, then focus on adapting Sun’s abundant server expertise to promote a unified vision that unites Mac OS X, the best bits of Solaris, and Linux – capabilities in which are now essential for companies that truly want to play in the top end of town.

There are signs that Apple’s enterprise play – often discussed but still noticeable absent – may be slowly coming together. Apple did, for example, recruit a leading server brain from IBM, who brings decades of experience in building the kind of things that have kept IBM in a class of its own when it comes to IT (the move also got Apple, which IBM curiously views as a competitor, sued).

If he can help Apple position itself in the right way – and build up or buy teams of appropriately skilled technicians – there’s no reason Apple couldn’t become a credible player in the business market.

Of course, making that play would require Steve Jobs to reconsider his almost concrete grasp on Apple’s direction, identity, and strategy. Mac fans at AMW and elsewhere may not mind the thrill of being kept in the dark about new products, but business customers have billions riding on new product and technology decisions – and while an Apple-Sun mashup could easily present a convincing and viable face to that market, it would certainly need to step out of its element.

This would also require Apple to stop focusing on pretty devices and dot-dot upgrades to its totally client-application focused strategy. Focusing on computer interfaces is all fine and well, but it traps Apple inside a  bell jar, beyond which are all the other parts of the IT market that Apple refuses to explore.

For all the talk about Mac OS X versus Windows, Apple won’t ever conquer Microsoft, which has a much broader software range that will help it brush off anything Apple throws at it. And, once the market realises that Apple’s polish is as vulnerable to sharemarket doldrums as the rest of the market, investors will be looking for some truly new business directions from Apple.

Addressing the business market – on its terms and to its expectations – is a natural new direction for Apple. And, say what you want about Sun’s misfortunes, but it was always a company that believed in innovating its way into new places – just like Apple. Better still, Sun has a ready-made product line, recognised technology credentials, and thousands of enthusiastic business customers. Put the two together, and there’s no telling where they could end up. But I’d bet there’s plenty of blue sky there.

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