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Where Sun Sees Brighter Days

No major tech company was hurt more by the downturn than Sun Microsystems (SUNW). But that hasn't slowed Sun and its opinionated chief executive, Scott McNealy. On Feb. 1, it announced two new offerings. Sun Grid computing utility lets customers rent computing power, starting at $1 per hour, that will be delivered via one of four data centers maintained by Sun. The other, the Sun Grid storage utility, offers a gigabyte of storage for $1 a month. Showing no signs of fatigue after a day spent with Wall Street analysts, McNealy sat down with BusinessWeek Computer editor Peter Burrows to discuss Sun's new offerings. Edited excerpts of their conversation follow:

Q: Since the late 1990s, you have been a believer in utility computing -- where more computing tasks are delivered as service over a network, much like a utility company delivers electricity. In this scenario, individuals do not have to deal with the complexity and cost of running and maintaining their own software programs. There are signs that utility computing is starting to pick up, but was the concept oversold?

A: Sure, and the same thing goes for the thin client. (A thin client is a stripped-down PC that acts as a dashboard for all the information doled out by a server in a utility-computing environment). Me and Larry [Ellison, CEO of Oracle (ORCL)] oversold it -- or maybe that's not it. Maybe the world just wasn't ready for it.

But it's going to happen. I can walk right over to that SunRay (Sun's thin client) and beam my desktop down to me, just like that. Even better, when I leave here, I can do the same thing when I get home. Try to do that with your laptop. I do 100% of my work on a SunRay. It's all I have in my home. So this isn't science fiction. It works. You can take my cellular phone, but don't take my SunRay.

Q: So that means Sun employees can get to their files from any SunRay. How are you using this technology internally?

A: Half of our customers are what I call homeless -- they don't have an office. We're trying to drive this to the point that three to four people share every office. We've studied it in depth. It saves the average person 3.3 hours a week, at no extra charge to us -- and they're happier [because they can work from home or wherever is most convenient]!

And then I want to put a SunRay in every employee's home. We'll let them pay for the broadband, and over time, we'll add VoIP (voice-over-Internet protocol software, which would enable employees to make calls over the Internet, without incurring phone bills).

Q: You're really going to give every employee a SunRay?

A: We're going to try to figure it out.

Q: Let's turn to Sun's new utility-computing offering. For starters, given all the talk on this topic in recent years from IBM (IBM) and others, including Sun, how much true utility computing is really being done?

A: Who has ever offered the equivalent of a price per kilowatt hour? We're the first. IBM talks about "on demand" computing, but it's all tied up with IBM Global Services contracts. It's really "headcount on demand," [a way for IBM to log hours for its consultants].

Q: How big a business will Sun Grid be for Sun? What customers will really use it?

A: The Wall Street guys will certainly use it for their Monte Carlo analyses. The oil and gas companies will use it for simulations of their reservoirs. The designer-drug companies will use it...the movie industry will use it for rendering. Software developers and free-lancers would love to have access to a computing environment like this, rather than be limited to what they currently have -- usually just a PC. And we'll have the biggest and the best [grid].

Q: Will this be a significant, material business in a year's time?

A: We're planning on being surprised. People are coming at us with all sorts of ideas.

Q: Are phone companies and others starting to get serious about offering more kinds of digital services over their networks? Is your "technology-on-tap" vision starting to gain momentum?

A: Listen, we don't want to be in the business of selling subscriptions [to utility-computing services, such as the new Sun Grid services]. But if the service providers don't step up, we'll do it. We call it 'irritating the market.' SBC (SBC), where are you? BellSouth (BLS), we're waiting! Verizon (VZ), this is a no-brainer!.... It's not necessarily in our long-term game plan [Sun would rather just sell the computers, than sell the use of those computers], but if nobody else steps up and we get really good at it, who knows?

Q: Did you give Wall Street analysts any updated guidance for 2005?

A: No. We only give guidance on things we know with certainty, whatever that is, or at least think we know In this world of Sarbanes-Oxley, you can't shred or delete anything anymore [laughs], and I don't want someone coming up and accusing me of setting unrealistic expectations or overhyping the stock??'ve got enough risk. As a matter of fact, when I leave here, I'm going to go upstairs and [sign the government documents to certify that Sun's quarterly financial reports are accurate].

Q: I would imagine that must be a somewhat scary moment for a CEO.

A: What gets me is this: Will Congress ever agree to sign off on the federal budget, and accept the same level of personal liability CEOs are being asked to accept?

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