Sun's Picture A Little Cloudy
Sun has started hedging its bets with more open products and new business strategies. For example, it is experimenting with a new pricing model where companies pay an annual subscription fee per employee to use a package of Sun software, with no additional cost for basic maintenance, service or training. After some early success, management is considering plans that include hardware as well. The number of employees required to cover the cost of the systems would be significant, however. Ramping up quickly enough to make the cash flows work would be a challenge.
That's not the only challenge that Sun faces. According to the CRN Monthly Solution Provider Survey, the percentage of resellers saying Sun was their best-selling brand of Unix server in July was 11 percent. That compares with 31 percent for the same month a year earlier.
And Citigroup Smith Barney adds:
Morale-sapping restructurings and price wars with Dell and IBM are Sun's biggest risks. Even if Sun can hold IBM at bay at the high end of the market, Sun must compete with Dell and others for a piece of the low-end/utility computing opportunity.
It's clear, as the analysts point out, that Sun is working on growing into new markets. It's continuing to build its relationship with Advanced Micro Devices on implementing AMD's Opteron chip into its systems. And now, according to this item, Sun may be aiming for a piece of the home market with a Sun Ray pilot program. If nothing else, the potential new venues appear to be helping employee morale, even as Smith Barney speculates on morale issues.
Among other things, the Sun Ray At Home pilot program allows employees to "hot desk" between their work device and their home device.
Writes Sun blogger Mary Mary Quite Contrary: "Oh how I love this, oh how i love this. Let me count the ways."
If the marketplace starts counting the ways, analysts may rethink their outlook on the company. But for now, shares of Sun stock continue to hover ever closer to their lowest price over the past 52 weeks.