Feeds

Shrinking Sun under the gun

Could Fujitsu unite?

High performance access to file storage

Comment Here, with the stock market melting, we find Sun Microsystems in most uncomfortable territory. It's got a stock market value of $7.7bn, which means that the one-time lord of the servers is a mid-cap company.

Our friends on Wall Street warn that Sun needs to maintain at least a $10bn market capitalization to stay in the large cap territory and part of the large cap funds. Should Sun hang around in $7bn country for too long, then a sell-off will start, making things even worse on Sun investors. (In addition, a whopping 57m shares, nearing 10 per cent of all out-standing shares, are already shorting Sun, up from 25m last month.)

The odds of Sun bounding back to large cap status don't look too good if you focus on the near-term. Sun's due to report fourth quarter results on Aug. 1. Typically, the fourth quarter is Sun's best, although the current economic climate fails to inspire much optimism. "Given Sun's reliance on the transactional server business in a weak IT spending environment and exposure to the no-growth Unix market, we believe that the company will find it challenging to boost revenue growth over the next few quarters, especially if the dollar stabilizes or appreciates," Toni Sacconaghi, an analyst with Sanford C. Bernstein & Co., wrote in a recent research note.

Sun will really need to surprise investors on Aug. 1 to get that JAVA stock heading higher. Without a shocker, Sun shares will likely keep declining.

Sun's stock market value raises other concerns because it leaves the company looking very much like an anomaly among its peers. Try and find another $7bn-$8bn company with 30,000 employees.

We've always admired Sun management's stance of viewing mass layoffs as something to be avoided at all costs. In addition, we've bought into the idea that a revamped Sun could rebound from darker days and grow again, which served as the basis for keeping so many staff on board. Sun Chairman Scott McNealy would often remark that you want warm bodies around when the orders start flooding in, and you want morale as high as possible before that point as well.

It's difficult to see how Sun can cater to such feel good tenets given the realities of its situation.

The company has gone through a number of smallish layoffs. It's made many acquisitions - both large and small. It's rolled out new product lines. It's tried to generate fresh momentum through various, creative open source plays. So far, however, these moves have failed to result in a meaningful, lasting momentum shift that could really accelerate Sun's growth. Sun has been hunting for a dramatic game changer, but such a product or approach has failed to arrive fast enough.

We're left with a company heading toward $7bn in market cap territory that has close to $4bn in cash, an immense intellectual property portfolio, a massive customer base, some very strong technology and a still admired brand.

Enter FuSu.

High performance access to file storage

Next page: Enter FuSu

More from The Register

next story
Seagate brings out 6TB HDD, did not need NO STEENKIN' SHINGLES
Or helium filling either, according to reports
European Court of Justice rips up Data Retention Directive
Rules 'interfering' measure to be 'invalid'
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Cisco reps flog Whiptail's Invicta arrays against EMC and Pure
Storage reseller report reveals who's selling what
Bored with trading oil and gold? Why not flog some CLOUD servers?
Chicago Mercantile Exchange plans cloud spot exchange
Just what could be inside Dropbox's new 'Home For Life'?
Biz apps, messaging, photos, email, more storage – sorry, did you think there would be cake?
IT bods: How long does it take YOU to train up on new tech?
I'll leave my arrays to do the hard work, if you don't mind
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
HP ArcSight ESM solution helps Finansbank
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Mobile application security study
Download this report to see the alarming realities regarding the sheer number of applications vulnerable to attack, as well as the most common and easily addressable vulnerability errors.