Analysis: McNealy dumps Tux, gets serious

There was no penguin suit this year. The tough times facing Sun Microsystems called for something a little more serious when Scott McNealy addressed financial analysts here this week.

McNealy, chairman, chief executive officer and president of Sun, informed a critical analyst community that Sun will not change by mimicking the strategies of IBM, Hewlett-Packard and Dell.  This message was a far cry from that of last year's conference, when McNealy took the stage in a penguin suit, looking like the Linux mascot Tux, and explained why Sun had indeed decided to go in the direction of rivals and ship Intel -based servers with Linux on top.

"We're giving them more content and less entertainment this year," McNealy said, during an interview this week, setting his normally unrelenting comic persona to the side for a moment. "We are giving them fewer predictions, just more understanding of what we are doing, trying to be a little more transparent about what our strategies are. Hopefully, they will appreciate it. I think we are turning some heads."

Sun has been rocked by a tough hardware market and the evaporation of key telecommunications and network service provider customers. Revenue has tumbled from the $18.25 billion reported in 2001 down to the point where analysts are predicting a 2003 mark under $12 billion. Phrases such as "All time high" have been replaced with "Returns to profitability" in company earnings statements.

These tough times have analysts scrutinizing Sun's decision to stick with its own UltraSPARC processors and Solaris operating system, as servers running on Intel chips with the Linux operating system start creeping in on once-secure markets.

Yet even in casual conversation at the conference, several analysts detailed their reasons for confidence in the company and complimented McNealy on the eloquent way in which he laid out Sun's strategy. However, the positive words largely faded as they questioned how long Sun can go on being different from the rest of the hardware world. They fear Sun may be spending too much on research and development as hardware becomes a commodity.

The bottom-line question from the analysts seems to be whether being different is the right way for Sun to avoid the death knell that has sounded for so many other hardware vendors.

Different is exactly what McNealy wants to be.

"You have to go where the puck is going to be and not where it is," McNealy said. "If it's going to take the puck a little time to get there, it doesn't mean you go chase it. We often get there way too early, but that way is better than getting there too late."