Sun announces major losses. After 10 consecutive quarters of falling sales, how will Sun manage...
During a time when Dell Computer continues to grow revenues and earnings with its direct model, Sun Microsystems is announcing major losses with its indirect model. Recently on Oct 16, Sun announced $286 million dollar loss for quarter. Sales have been down for 10th consecutive quarter. Many other companies are also selling direct to customers now. IBM, Gateway, Prag Computer and countless others are selling direct to customers. Sun is still relying primarily on resellers to sell its products which may put it in uncompetitive position. It appears that some of their servers are now being sold online through the Sun website, but this is difficult to navigate. The problems that Sun Microsystems is having started after internet bubble burst. Customers became more price-conscious after this period and were no longer willing to pay thousands more for a Sun Server when they could buy similiar competitor servers for thousands less. Sun has also been holding on too tight to its proprietary operation system, Solaris. Only until recently did Sun embrace Linux as an option for its servers. In addition to this, CEO Scott McNealy has been known for Microsoft bashing and does not offer Microsoft products on its server. This has alienated customers and severed any potential relationship that they may have with Microsoft. Now, if Sun starts offering Windows 2003 Server on its servers, it will look like it has lost the battle with Microsoft and pricing with MS will most likely not be as good as if they were on good terms. The battle between Sun Microsystems and Microsoft is really a foolish thing. The battle should be between Sun and its competitors (Dell, IBM, etc). But Sun has made the battle on the software side. The battle has been made between Solaris versus Windows NT/Windows Server. For customers buying Sun servers, the hardware probably comes first before the software. What makes Sun Servers different from lots of other servers is that they offer numerous processors and huge amounts of RAM. It is not Solaris that makes them better. Now the company is in a difficult position. Its high end servers are not competitive with lower prices that can be achieved by linking multiple lower end Intel/AMD servers together. So, now Sun has to decide what it wants to do. It can compete against lower end server with its lower end server on price and lower profit margins. And/or it can continue to offer high end servers at high prices for highly specialized applications and hope that the customers will be there. | Sources: http://story.news.yahoo.com/news?tmpl=story&u=/nm/20031017/bs_nm/tech_sunmicrosystems_earns_dc_4 |
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