Sun's Rekindled Star

While Solaris and Java clearly are at the core of Sun's software business, its momentum is coming from a once unlikely source--industry-standard hardware. Sun jumped on the x86 bandwagon three years ago when AMD released its 64-bit Opteron processor. About 18 months ago, when Sun released its multicore Galaxy servers, it became the first to stress the engineering for major improvements in power management while employing a unique approach to cooling.

Sun has quickly seen market-share growth in industry-standard servers. The company last fall re-entered the mix with blade servers, dubbed the SunBlade 8000 family. Sun also recently released the SunBlade 8020, a four-socket AMD 2.8-GHz Opteron server that the vendor says is the fastest blade in the market to date. If Sun's momentum in systems sticks, things could get even more interesting this summer when its first servers based on Intel's Xeon processors hit the channel.

"It really adds to our credibility to have both AMD and Intel as we broaden our product range," Sun's Fowler says. Solution providers agree.

"They had an obvious absence, and they are now filling that gap," says Warren Wilkinson, executive vice president of Sigma Solutions, a national IT solution provider.

Just as important, Fowler says there will be marketing and co-op dollars from both Sun and Intel to support the Xeon-based servers.

At the same time, Sun hasn't taken its eye off its SPARC business. Last year, Sun released its Niagara systems, a major leap in multicore computing for its SPARC processors. Today's systems are available in eight-core configurations. And Sun is already prepping the channel for its next SPARC breakthrough--a next-generation processor, code-named "Rock," will be available in 16-core configurations in 2008. "Essentially, we are looking at Rock as redefining the midrange to high-end space," Fowler says.

Storage: The Must Fix

Sun execs are bullish on the company's storage business, which has taken on a new look over the past year with the acquisition of StorageTek's product portfolio. But observers say Sun's integration of StorageTek has been rocky. The company lost key execs--from both StorageTek and Sun--while it took longer than expected to create a common line card.

For the most recent quarter, Sun's storage revenue declined 7 percent over the same period last year. "Sun's storage business remains a work in progress," Illuminata's Haff says.

Technology Business Research analyst Farina puts it more bluntly. "I see it continuing to decline," he says.

Of course, Sun sees it differently.

Nigel Dessau, Sun's senior vice president of storage marketing and business operations, argues that much of the revenue decline stems from the fact that before the company combined businesses, it drew revenue from each other based on prior reselling relationships. "We don't get to count that twice anymore," Dessau says.

He admits that the integration of the companies was complex, but as of October, the majority of it was complete. "It was painful, but integration of that magnitude is always painful," he says.

With StorageTek's high-end tape business, Sun has a new entry into the high-end data center--specifically regarding connectivity to IBM mainframes. In addition, Sun remains a key OEM partner of Hitachi Data Systems at the high end, LSI Logic's Enginio division at the midrange and Dot Hill at the SMB level.

Meanwhile, by acquiring StorageTek, Sun is pushing into the network attached storage (NAS) space, where it's been notably absent. Indeed, it's not clear that CEO Schwartz is entirely satisfied with Sun's storage position. At last month's analyst meeting, he indicated he would love to make some kind of deal with EMC.

"I haven't been shy about talking about potential partnering opportunities with EMC," Schwartz told analysts. Sun's next big technology could be Project Blackbox, which it describes as the next-generation data center. (See "In the Pipeline," left.)

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