Why Sun Can't Afford To Shine AloneRobert D. Hof
Late last June, managers of Sun Microsystems Inc.'s new SunSoft software subsidiary huddled at a retreat in Sonoma, Calif. Their mission: develop a plan to fight off the many companies trying to usurp Sun's No. 1 spot in workstation computer sales. On a lark, they turned for guidance to the I Ching, the ancient Chinese Book of Changes. William L. Larson, the software unit's marketing vice-president, solemnly threw the requisite three coins a total of six times. The name of the resulting hexagram was shih, which means "the army."
The message wasn't lost on Larson or his colleagues. Sun is still on top, of course. But in the past six months, some of the computer industry's most powerful companies have banded together to try to take the lead in the $7.3 billion-and-growing market for workstations. While Sun pushed on alone, archrivals IBM and Apple Computer Inc. agreed in July to collaborate on workstation technology. And last winter, powerhouses Compaq Computer, Digital Equipment, and Microsoft formed a workstation consortium, which subsequently has grown to include 84 hardware and software companies. Equally worrisome is that Sun's product line is beginning to show its age as both new and old competitors bring out machines that are superior in both price and performance. EASIER LINK. Now, Sun has an ambitious new program of counterattack. On Sept. 4, it will unveil plans to make its SunOS operating system, a version of American Telephone & Telegraph Co.'s popular Unix program, run on more computers than just its own. The company will begin by adapting the operating system for machines based on Intel Corp.'s popular microprocessors, which power IBM PCs and PC-compatibles. "Software is the battleground of the `90s for computer companies," says SunSoft's Larson.
Sun's new strategy is aimed at ending its isolation in the marketplace and greatly broadening its influence. By making the operating system, which endows a computer with its basic functions, run on more machines, Sun will make it easier for customers to link Sun workstations with other computers on a network. More important, the move could also boost the total number of customers using machines that run SunOS. That in turn will encourage independent software houses to write new programs for SunOS and thereby boost the appeal of Sun's and other SunOS computers to customers. Boasts Sun President Scott G. McNealy: "Sun is sitting on a huge, huge market opportunity."
There's plenty of risk to go along with that opportunity, though. Sun has already wooed some small clonemakers. But it may have a tough time getting other PC companies and workstation makers to sign on. They may be leery of purchasing critical software from such an aggressive competitor.
Then again, Sun is making its move from a position of strength. While many competitors grapple with sluggish sales and even losses, Sun keeps defying gravity. For fiscal 1991, ended June 30, it racked up a 30% rise in sales, to $3.22 billion, and a hefty 71% jump in net income, to $190.3 million. According to market researcher International Data Corp., Sun holds a 32% share of the workstation market, putting it well ahead of its closest rival, Hewlett-Packard Co., with 21%.
Sun has tried before to build a critical mass for its technology and establish a de facto standard, but with hardware, not software. For the past four years, it has encouraged any and all to adopt its Sparc computer design, based on reduced instruction-set computing (RISC). Yet only a handful of major suppliers have done so. Last year, just 3,000 Sparc clones were shipped throughout the world. And even though Sun itself sold some 135,000 machines in 1990, just 3,500 applications programs work with SunOS, vs. more than 20,000 for IBM-compatible PCs. "Volume is the name of the game," acknowledges SunSoft President Edward J. Zander.
Sun needs a constant flow of new programs to keep its workstation sales booming, particularly now that it's facing stiff challenges in hardware. Until recently, its top-of-the-line Sparcstation was the fastest general-purpose workstation around, executing some 28.5 million program instructions per second (MIPS). But IBM weighed in with a 30-MIPS model last year, and HP last February shot ahead with a 76-MIPS machine.
Sun customers and resellers say the company badly needs to boost its high-end models' performance. Says Stephen P. Basile, a manager at Sun reseller ERI Inc. in Hauppauge, N. Y.: "We're quite ready for Sun to take the next leap." Unfortunately, he'll probably have quite a wait. Sun is counting on Texas Instruments Inc. to come up with a SuperSparc chip that should outrun even HP's machine, but analysts figure Sun won't ship it in finished workstations until next spring. Sun is also behind in delivering a long-promised machine that relies on multiple processors to provide high-speed services to large networks of its workstations.
SOLID START. There's trouble at the low end of Sun's business, too, where it sells most of its machines. The company still offers some of the cheapest workstations around, starting as low as $5,000. But that advantage will narrow quickly. IBM is set to announce new RS/6000s starting at $4,000 on Sept. 20. HP isn't far behind with its own inexpensive models, too. Already, claims HP marketing manager Robert C. Weinberger, "We're getting called into accounts that had been locked into Sun."
So Sun is counting on software to make up for other shortcomings. The company figures it has a solid start: Even though Microsoft Corp.'s MS-DOS and Apple's Macintosh operating systems far outsell SunOS (chart), the company has already installed about 450,000 machines running the program.
But before the strategy can really succeed, Sun must convince rivals that it can work well with them. It has made some progress: Sun is already collaborating with HP on standards for sharing data and programs across different computer systems. Now, it needs to do more of that kind of cooperating. Regardless of what the I Ching advises, making peace in the computer industry these days is just as important as waging war.
SUN'S RIVALS The biggest sellers of desktop operating systems Developer/ Units shipped Program 1990 MICROSOFT MS-DOS 5,200,000 MICROSOFT Windows* 3,000,000 APPLE Macintosh OS 820,000 MICROSOFT/IBM OS/2 333,000 SUN SunOS 146,000 *Requires MS-DOS to run DATA: INTERNATIONAL DATA CORP.