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McNealy slams Wall St over Sun ratings

Carly blames drive for hot boxes, killer apps

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ComputerWire: IT Industry Intelligence

Chief executives for Sun Microsystems Inc and Hewlett Packard Co struck-out yesterday as they struggled to explain the technology slump, now projected to last into next year.

Sun chief executive Scott McNealy decided to shoot the messenger. Speaking at a Vignette Corp customer conference, in Austin, Texas, Scott McNealy slammed Wall St for marking down his company's stock.

McNealy spoke after Santa Clara, California-based Sun last week announced a first fiscal quarter loss of $111m on revenue that fell four percent to $2.75bn. The company also announced plans to lay-off 4,000 employees.

McNealy attacked analysts who he said had given "raging buy" ratings on Sun several years ago when it was trading at "10 times revenue". Now, with the stock valued at closer to 50% of its annual revenue, most have put the company on a hold.

"That's why they are analysts - they don't have real jobs," McNealy said. He said he was urging employees to "go illiterate" and not read business news reports as Sun - like Vignette - has a "very solid financial position going forward."

HP chairman and chief executive Carly Fiorina took a more sober tone. Speaking to analysts, Fiorina said she expected single-digit growth in IT spending next year. In the long-term Fiorina expects rates of less than 10% for the industry.

Her attempt to identify the roots of the malaise, though, was shaky. Fiorina criticized other CEOs for overspending on technology during the last decade. "Most CEOs know they overspent on technology in the 1990s. They spent on hot boxes and killer apps."

Due to this overspend, customers are placing a larger emphasis on long-term investments and picking vendors offering a product roadmap that extends for several years. Inevitably, Fiorina claimed HP - with products spanning handhelds to servers - provides everything a customer needs.

Fiorina chose to ignore to the part played by Palo Alto, California-based HP in that technology overspend. The company invested in development of IA-64 with Santa Clara, California-based Intel Corp, betting the technology - which was delayed and which has yet to make its mark - would go mainstream.

Fiorina also overlooked HP's abandoned Java strategy. The company spent $470m in early 2001 acquiring Java 2 Enterprise Edition (J2EE) vendor Bluestone, subsequently notched-up heavy losses and shut down the operation this year. Along the way, HP peddled its Chai embedded Java technology, despite being unable to present a single customer.

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