Sun’s restructuring leaves questions about direction

Customers will be affected, says analyst

The restructuring at Sun Microsystems announced last week, in which the company said it will “simplify” product lines, eliminate redundant research and development and cut its workforce by as much as 13%, has left a lot of unanswered questions, especially about how these changes will affect Sun’s customers.

“There was very, very scant information provided yesterday that would allow us to go through an analysis of what the effect is going to be on Sun’s products,” says Paul McGuckin, an analyst at Gartner who covers Sun.

Sun’s new CEO, Jonathan Schwartz, says that the changes he is seeking will have little customer impact but will enable the company to focus on network computing and technologies to support it.

But Schwartz didn’t provide the details about how that will be achieved, and company officials weren’t adding any last week. When asked which product lines would be affected, the written response from a Sun spokeswoman was that “the company has not identified products or projects that will be affected at this time”. The answer was similar for its impact on R&D.

That response has left analysts largely speculating.

For instance, Schwartz, in illustrating the direction he intends to take the company, cited several newer products as key to its future direction, such as its eight-core UltraSparc Niagara processor and the forthcoming “Thumper”, an Opteron-based server that integrates with storage. But in regard to Thumper, McGuckin says that if he was a customer of Sun’s proprietary RAID controller, he would have concerns.

McGuckin says that Schwartz’s citing of Thumper as an example of Sun’s future “calls into question the fate of some of Sun’s other storage products, which are based upon what Sun would call proprietary technology.” Those proprietary storage technologies “are going to get more scrutiny and perhaps [be] cut,” he adds.

“What we’re telling clients is any road map dependencies that they have — they are going to need to get written commitments from Sun,” McGuckin says.

Simplifying hardware products may lead to development of servers built around similar architectures, says Richard Partridge, an analyst at Ideas International.

For instance, an UltraSparc server and an Opteron-based server could get the same design team, and customers may see improved pricing because of it. “As part of this product rationalisation, you may find some design teams that are surplused,” he says.

While Sun says customers won’t feel any impact from the cuts, analysts don’t see how Sun can cut 4,000 to 5,000 employees from its 37,500 employee base without the cuts having some impact.

“Customers can expect some consolidation in their sales force, and they are going to find it harder and harder to get a specialist,” says Susan Aldrich, an analyst at Patricia Seybold Group.

Sun posted a loss of US$217 million (NZ$345 million) in its most recent fiscal quarter, but it hopes that its workforce reductions and its office consolidations will yield annual savings of up to US$590 million.

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