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Sun's plans...and how they could go wrong

George Colony CNET News.com

Published: 22 Sep 2004 10:55 BST

Sun Microsystems seeks to avoid oblivion by pursuing a simple but powerful strategy.

Its plan? Attack Red Hat, use control over the operating system and the platform to disrupt competitors' pricing and business models, out-engineer everybody in the x86 space and use an alliance with Microsoft to fight a common enemy: IBM.

Last week in California, I visited two Sun bigwigs: Jonathan Schwartz, president and chief operating officer, and Scott McNealy, chairman and chief executive. When Schwartz asked me, "What do you think of Sun?" I gave him an honest answer. "Sun risks becoming the data general of the decade. The company could easily slide toward becoming a 'zombie' -- a lot of cash but no life, staggering and lurching with a fading heartbeat at each step," I said.

Schwartz's comeback was, "You're wrong, and here's why." He then laid out the surprisingly simple and cohesive strategy that Sun will follow in pursuit of a recovery. Here it is, in a stripped-down form.

Step No. 1: Make the argument that Linux equals Red Hat. Linux has become a social force, with all of the free world supposedly cooperating to create an always improving operating system that is forever cheaper and more valuable than the old versions of Unix.

Sun's view is that Linux is nothing more than Red Hat. The operating system is not about world peace and the charitable work of the world's great programmers. It's like every other operating system ever created: It's about the foibles, greed, mistakes and engineering prowess (or lack thereof) of one vendor -- in this case, Red Hat.

Step No. 2: Belittle Red Hat. By collapsing Linux into Red Hat, Sun now has a clear target. It can hammer away at a company, as opposed to waging the impossible task of fighting a social movement. And according to Sun, Red Hat is a very vulnerable target -- a company with limited resources, engineering talent, world coverage and capabilities -- with potentially serious intellectual-property issues.

When Sun visits billion-dollar companies, it uses an effective line of attack: "You're going to entrust the future of your company to what vendor? A little software player with no proven abilities in the enterprise business? Are you out of your mind?"

Step No. 3: Contrast Sun with Red Hat. Sun has been a trusted, pragmatic partner with its customers for decades. It is going to return to those customers and clearly contrast its long-term relationship with newcomer Red Hat. The company is doing this now with its old Wall Street customers.