The New Sizzle At Sun

The computer industry has been predicting Sun Microsystems Inc.'s imminent demise almost from the day it introduced its first whizzy engineering workstations in 1982. If bigger rivals such as IBM and Hewlett-Packard Co. didn't crush it, the pundits predicted, personal computers would soon overtake its workstations. The naysayers seemed to have a point in the early 1990s, when hotter machines eclipsed those offered by Sun and profits sagged. Groans Sun Chief Executive Scott G. McNealy: "It's been 13 years of people thinking we're toast."

Sun hopes it can quiet its critics once and for all on Nov. 7, when it will unveil new workstations three times faster than its current line--its biggest boost in speed since 1989. Armed with a new microprocessor chip and a raft of other technologies, the $17,000 to $60,000 machines will catapult Sun's computers from some of the slowest on the market to some of the fastest. That could renew Sun's faded appeal among chip designers, software engineers, and other demanding buyers. "They're roaring back," says International Data Corp. analyst Thomas G. Copeland.

RAISING THE BAR. The new machines arrive at a time when Sun's prospects already are brightening. Thanks chiefly to accelerating sales of its other computers--servers that run commercial data networks and connect to the Internet--profits for the quarter ended Oct. 1 shot up a surprising 120%, to $84 million, on sales that were up 17%, to $1.5 billion. In recent months, Sun also has electrified the industry with its new Java software, which promises to turbocharge use of the Net's World Wide Web and give Microsoft Corp. fits. The result: Sun's stock price has nearly doubled since July, to more than $76 (chart).

The Mountain View (Calif.) company couldn't have afforded to fall further behind HP, IBM, Digital Equipment, and Silicon Graphics in workstations--still the lion's share of its $5.9 billion in annual sales. In an industry driven by speed, "we had to raise the bar," says Edward J. Zander, president of Sun's hardware unit. Thanks to low prices and a large base of software, IDC figures that Sun will maintain a leading 28% share of the $17 billion market this year--although that's down from 30% last year.

Sun faces a bigger threat than ever from PCs. On Nov. 1, Intel Corp. introduced the Pentium Pro, its next-generation successor to the Pentium chip that powers millions of PCs. Intergraph, HP, IBM, Compaq Computer and others have announced Pentium Pro machines offering higher performance than older Sun machines. Says George Weiss, vice-president for market researcher Gartner Group Inc.: "Sun was in danger of Intel sweeping them off the floor with Pentium Pro."

Sun's new machines offer far more than just more raw computing power. Its new UltraSPARC microprocessor also contains new instructions to speed video and 3-D graphics without expensive add-in cards. Moreover, Sun borrowed from supercomputers a technique for moving data inside the machine eight times faster than current models. Next year, the company expects to use the same technologies to expand sales of large servers, which are used for building computerized warehouses for corporate data, managing customer help desks, and other such applications.

The Internet could provide an even bigger boost for Sun, which is already the largest Net server supplier. The loudest buzz centers around Java, Sun's software for creating network-based programs. By making it easy to download data and small programs from the Net, Java could eliminate the need for costly disk drives or even an operating system--such as Microsoft's Windows. Cheap Java devices may be years away, but the mere potential is opening doors. Says Zander: "We may do a Java sales call and sell a data warehousing system."

Not everyone is bowled over by Sun's renaissance, of course. Sniffs Silicon Graphics Inc. product manager Peter Wagner: "This is no leapfrog situation for Sun." Indeed, new machines from almost every rival next year could once again pass Sun. And buying Sun's new machines will force many customers to switch to its new operating system--a disruptive move that just might spur some to look at rival offerings. Sun "will see a lot more competition from now on," says David Pensak, a computer consultant with DuPont Co. Maybe. But for the first time in years, Sun is on the rise.

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