Sun's strategy: Hit tech's biggest growth areas

Sun says it's focusing its future strategy on areas of the technology industry poised for the strongest growth.

Sun executives discussed a strategy they call Redshift at a daylong event for news media Friday in East Palo Alto, California.

Sun's CTO, Greg Papadopoulos, said Sun has identified three areas where demand for more computing is expected to be greatest: digital content delivery, high-performance computing, and providing service to SMBs.

The idea is to stay ahead of Moore's Law, the technology industry calculation that computing power will double every 18 months while the cost keeps coming down, Papadopoulos said. Sun does not see the growth potential of commodity areas of computing that are affected by Moore's Law, such as hardware and software to do accounting, payroll, and other general automated business functions.

"They're just not the ones at individual companies that are going to create the dominant demand for computing. Therefore, they will not have the pole position in leading how we design [IT] architecture going forward," he said.

The pole position will go to customers delivering digital content over networks to end users, such as the video-sharing Web site YouTube.com or telephone service provider Verizon delivering video to cell phones.

Sun will also pursue more opportunities in high-performance computing in automotive design, oil exploration, financial services, and other fields.

It also sees potential in selling to companies that serve the SMB markets. Examples Papadopoulos gave include: Salesforce.com, which sells sales process automation software; WebEx Communications, the Web meetings company that is in the process of being acquired by Cisco; and eBay, whose auction Web site is used by SMBs as well as individuals to buy and sell products.

The notion that technology advances start at large enterprises and trickle down to smaller ones is "being entirely turned around," Papadopoulos said, with business services.

"The SMBs are leading the charge in terms of how they really want to go and consume computing. The large-scale enterprises are kind of waking up and going, 'Hey, why do I run my own e-mail server?' It's not a competitive advantage anymore," he said.

At the media summit, Sun's CFO, Michael Lehman, reiterated Sun's goal, first discussed at a February 6 analysts' conference in San Francisco, of achieving an operating margin of 10 percent by fiscal year 2009. It earned an operating margin of 2.9 percent in the second quarter of its 2007 fiscal year, which ended Dec. 31, 2006.

Also, Sun revealed new information about its efforts to improve energy efficiency in its products. Its SunFire T1000 and T2000 servers are eligible for a rebate from Pacific Gas & Electric, an energy utility based in San Francisco. Dave Douglas, Sun's vice president of eco responsibility, said that it is about to announce that a Canadian utility is also going to begin offering server rebates and that the company is in discussions with several other utilities to do the same, though he declined to identify them.