Big Sparc crunches Sun's Q2
IBM memo lost on Schwartz
Server and operating system maker Sun Microsystems has reported financial results for its fiscal second quarter, and the news was as bad as Wall Street expected.
Sun's sales fell 10.9 per cent to $3.22bn in the quarter, and the company booked a loss of $209m. Sun was pushed to the loss by a $222m restructuring charge relating to the layoffs it announced in November. Between 5,000 and 6,000 employees are departing the company's 33,400-strong workforce.
Sun's product sales, which are mostly for servers and storage, came to $1.94bn, down 13.8 per cent, while services revenues fell to $1.28bn, down by 6.2 per cent.
The usual breakdown in products that Sun spews over the Web to reporters wasn't available due to, well, a technical problem. Sun eventually posted a Web 0.5-style phone number on its investor relations site to get us plebes on the call. I got on just as Jonathan Schwartz, Sun's president and chief executive officer, started talking about Sun's systems business. (About 10 minutes into the call, if it started on time).
Sun started by giving a financial breakdown by product family, but this breakdown is based on billings during a quarter versus revenue booked. So the numbers, while an improvement over the skinny data Sun used to give out, do not give a precise picture of the revenue during the quarter.
Billings fell 32 per cent with Sun's high-end and midrange Sparc Enterprise servers - which are comprised of some older UltraSparc-IV kit made by Sun and mostly rebranded gear made by Sparc partner Fujitsu. For all of IBM's talk last week about how virtualized high-end Power and mainframe systems were sucking the life out of its x64 business, Sun's customers didn't seem to get the memo. (Sun is more heavily focused in financial services, telco, and government than is IBM, so that might have something to do with it). Sun's "Niagara" entry and midrange multithreaded Sparc T machines continue to be a bright spot for the company, with billings up 31 per cent to $369m in Q2.
Schwartz said that the Niagara family of machines is now at a $1.4bn run rate. What is probably happening in Sun's Sparc business - only Sun knows this for sure, and it sure didn't say so - is that many of Sun's customers who might have bought midrange Sparc Enterprise machines have downshifted to bigger (and less expensive) Niagara boxes. They all run the same Solaris, after all.
Schwartz said that the high-end business tends to be lumpy, reminding Wall Streeters that high-end revenues were up 16 per cent two years ago and up 23 per cent in fiscal Q1 2008. In fiscal 2007 and 2008, billings for big Sparc iron were essentially flat at $3.4bn. To meet that level of billings in fiscal 2009, Sun has two quarters (and one of them half done) to bill nearly $2.2bn in big Sparc boxes.
Sun hasn't had two quarters in a row like that for big iron in a long, long time. So a decline for Sparc Enterprise machines this fiscal year seems likely, given the state of the global economy. And Niagara machines will have a tough time filling in the gap.
Next page: Galaxy Quest
RE: RE: Re: Matt
"Actually, though you say that you can run RHEL, Windows, and OpenVMS, the vast majority is HPUX...." Which includes all those Slowaris shops moving their high-end apps off Slowaris onto Integrity. Obviously for them hp-ux is more than good enough.
"....Once PA-RISC users are forced to the inferior Itanium or to SPARC or POWER, Itanium will stop it's slow growth and start trending down." Firstly, why should the PA-RISC crowd be "forced" to anything? When they are choosing to move off PA-RISC they are taking the simplest route of straight 11i v3 compatibility between PA-RISC and Itanium. This is shown by hp's conversion rate which is why they are not just holding share but gaining it, especially in the high-end. Sun's spectacular fail in trying to poach Alpha and PA-RISC customers from hp is symptomatic of Sun's decline.
RE: Re: RE: Re: Matt
"Integrity growing in market share? That's absurd....." Really? I suggest you take it up with Gartner and IDC then. I'm sure they'll take your word for it.
"....Yes, they are growing in revenue, but that's because they are over priced...." Actually, the Itanium servers are cheaper than the PA-RISC ones they replace. And I believe it is the market that sets the value of a product - if they think it is overpriced they don't buy it - but it seems the market is much happier buying Integrity than any SPARC server, especially for those business-critical high-end jobs. Of course, it could be that the rest of the market is just incredibly stooooopid, and you are the only genius here, but somehow I doubt it....
"....(let's not play the high-end game that HP likes to play, OK? We're talking overall shipments, not just one segment)...." Well, taking overall shipments then hp is number one in servers fullstop! Oh, you want to narrow it down to a few segments then? I wasn't talking just one segment, but you seem to be studiously avoiding the fact that the high-end is the margin-rich area, and Sun is not selling there whilst hp are mopping it up. Sun can sell squillions of small boxes at a tiny margin and they will lose money (like they are), whereas hp can dominate the high-end and make a healthy profit (and lo and behold, they are!). And of course you forget that hp shares components between the Integrity and ProLiant range (that would be the number one x64 range, in-case you've forgotten), which brings hp much better economies of scale than Sun can manage with their tiny Galaxy marketshare. So hp can price-match even Sun's hilarious attempts to buy marketshare and STILL make a profit.
"....Sun has 46.4% of the Unix shipments last year, that leaves HP and IBM to fight over the rest...." I expect those dubious numbers (from the Sun site?) refer to system shipments. If you want to look at revenue and profit then Sun is firmly back in last place. Which means Sun is just losing money on a lot of small systems whilst hp and IBM are making profits off less larger ones. And at the end of the day it's all about profit, which is why the market think Sun deserves to be in the toilet. If Sun was doing as well as you blindly believe do you really think the market cap would be so poor that it is basically saying the market thinks Sun without its cash reserves is a negative?
"....who really runs Windows on Itanium?..." Well, there's this product you may have heard of called Microsoft SQL. It is the most popular database in the World, and it doesn't run on SPARC of any form. It does run very well on Itanium. Lots of Windows shops with large MS SQL apps are growing beyond the 8-way Xeon world and for them the best option is Itanium, usually in hp Integrity servers. And what they are using the MS SQL database for is not the light-load webserving database apps that T1/T2 are used for, but real business-critical apps. Air Products is a good example, they run one of the largest SAP instances in the World on Windows on Integrity. But then I suspect your experience with Windows is a bit limited for you to even take that in.
"....HP's future is Linux on X64 and if you can't see that then you are blind...." Thank you for your concern, but the blind party has been Sun for years. Hp and IBM saw the value of Linux and Windows over a decade ago, Sun just saw a threat to their proprietary software. Hp and IBM built massively profitable businesses by mixing UNIX, Linux and Windows, but Sun just squealed on and on about "Solaris on SPARC" and nothing else, and gradually sank lower and lower. Then, when Sun had to cave in and sell x86, Windows and Linux it just looked stupidly late. Yes, hp has a future with Linux on x64, but they also have a future with Windows and hp-ux, and on x64 and on Itanium, as shown by the healthy profits. Sun's future is spelt out by their market cap - dying on their feet.
"....You really should do your reading for yourself and not rely on HP's FUD site for your information." Why not try reading a few more of The Reg's articles then. You'll find plenty on marketshare, Sun's dire market position, the lateness of Rock, hp's burgeoning profits whilst Sun hasn't made four straight quarters in the black since the dot bomb....
Re: RE: Re: Matt
Integrity growing in market share? That's absurd. Yes, they are growing in revenue, but that's because they are over priced. Analysts show SPARC shipments are 3.5x more than Integrity (let's not play the high-end game that HP likes to play, OK? We're talking overall shipments, not just one segment) Sun has 46.4% of the Unix shipments last year, that leaves HP and IBM to fight over the rest... Sun had year over year gains in market share gains in Unix of over 2% while HP was flat and IBM actually lost almost 1%... HP-UX is dieing and with it Itanium, as Linux is not growing on Itanium (shrinking), VMS is obviously dead, and who really runs Windows on Itanium?
HP's future is Linux on X64 and if you can't see that then you are blind. That future is coming fast.
You really should do your reading for yourself and not rely on HP's FUD site for your information.
RE: Re: Matt
Actually, though you say that you can run RHEL, Windows, and OpenVMS, the vast majority is HPUX. The numbers for the other OS's is closer to Linux on mainframe, which the MF'rs like to trumpet, but is really quite low. Once PA-RISC users are forced to the inferior Itanium or to SPARC or POWER, Itanium will stop it's slow growth and start trending down.