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The Network is the

Community

SUN MICROSYSTEMS

Consulting for Excellence

Richard Bodey –Executive Strategy

Daniel Farson- Chief of Financial Assessment


Sun Current
Strategy
Sun’s competitive strategy is a purely
focused differentiation approach

“Our main objective is to push Server


Sales through the Software Stack”

VP Regional Marketing
Profitability of
Current Strategy
P/E (TTM)

P/E ratio is above average and


competitors
Example: Apple/Sun
Comparison

Apple →Unix →PPC Chips →Desktop

Sun → Unix → SPARC Chips →Server


Example: Apple/Sun
Comparison
Apple→Unix→Intelx86→Desktop/Mobile
Devices/Mobile Store/ IPod/Music Store

Sun→Unix→AMDx86→Server/Java
What’s
Happening?

Your gross margin is higher than the


industry average, the sector average, HP
and Dell

Your operating margin lagging behind all of


your competitors and the averages of the
sector and industry
Sales Growth
Poor sales compared to all competition

Sales growth over the past five years


has been less than all competition
Quick and Current
Ratios
The Quick Ratio shows that you could
cover all of your current liabilities with
current assets, even without using your
inventory

Your Current Ratio puts you ahead of


most of your main competitors
Debt-to-Equity
Ratio
Your Long-Term Debt/Equity Ratio shows
that you are behind your competitors

Your Total Debt/Equity Ratio shows that


you are ahead of most of your
competitors
Net Profit Margins
Although your Net Profit Margin is positive,
it is still below all of your competitors

Your 5 year average is negative and is


lower than all of your competitors and the
sector and industry averages
Efficiency Ratios
Your Revenue/Employee is low, but it is
comparable to some of your
competitors

Your Net Profit/Employee is much lower


than any of your competitors
Five Forces
Rivalry
IBM
HP
Dell
Microsoft

New Compeition
Apple
Substitutes
Linux

Other OpenSource Servers

Cloud Computing/ Service Based Model


Buyer Power
Customer Driven Feature Request

Price Sensitive

Very Mature and Knowledgeable


Supplier Power
High Relative to the industry

Low relative to Sun based on in-house


R&D

Due to complete vertical integration in


the server market
Barrier To Entry/
Threat of Entrants
Strategic partnerships/Open Source
community thrive on low barrier to
entry

Threat is low until system of


monetization is in place
What Must
Change
Monetization Strategy of OpenSource

Mobile Presence must be Focused

Control and Structure must be Tightly


Align with Corporate Strategy

Change of Culture
From “A to B” to
“B2B”
New Corporate Strategy
Broad Differentiation
Best Cost Provider

INITIATIVES

Community

Sun Advantage -Sun++ Framework

Mobile Sun Advantage


Resources
The Power of JAVA
“Write once run anywhere”
MAC
PC
LINUX
PHONES
http://www.youtube.com/watch?v=537MtiQk1uo

OUR SOFTWARE WORKS EVERYWHERE


Culture
THEN: The Network is the Computer

1992->$20,000

NOW: The Network is the Community

2008->$500
SWOT
STRENGTHS
Customer base of open source projects

Altruism nature/ respect in community

Expertise in server production

Java name recognition

Product offering is need driven

Academic world has recognized Java as


the language of choice in technology
world
WEAKNESSES
Most successful projects are no yielding
return

Competitors have price advantage due


to R&D

Java Branding

No auxiliary services

Mobile branding is no-existent


OPPORTUNITIES
Customer base already exists.

Market segment of 2mill + mobile


customers waiting to be utilized.
THREATS
Competitors utilizing new sun model
with competing projects.

Branching of competing services.

Emergence of new technology making


current software obsolete.
Community
SUN PRODUCTS-
-JAVA
-OpenOffice

-MySQL
-Virtual Box

Major open source community


members:
Google HP Novell IBM Sun
Sun Advantage
Marketplace
Adds Ability to Monetize such open
projects by adding proprietary plug-in.

Adds specialization and core


competencies to be protected.

Adds incentive to developers

Adds security and code verification to


customer
Mobile Presence
Java Mobile Installed on 2,000,000 Cell
phones currently 5x the iphone.

Bring Sun Advantage to this new customer


base

Sun Advantage Platform Partnerships


Google Android
RIM BlackBerry
Strategic
Objectives
Build Community

-Raise Community and Knowledge Base


-Partnerships with Companies in non-
competitive industries
Provide Monetization of Third Party JAVA Software

-Sun Advantage Marketplace


Monetization of Current Open Source Projects
-Divert R&D to be split between Sun Advantage and
Open Source Projects
Timeline of
Profitability
Divert Funding Effective Immediately to require Module Code
Development

All Sun Projects will then be portable to Sun Advantage Marketplace


for Monetization

Launch Sun Advantage Marketplace Summer 2009

Partner with Google Summer of Code

Introduce Products to Sun Advantage Marketplace

Proof Of Concept for Future Ventures


Timeline of
Profitability
Sun Advantage Marketplace Mobile - Winter 2010

Grab Significant Market Share of Cell Phone Appliances by 2011

Key Strategic Advantages

Compatibility Issues

Open Source Expertise

Focus on Free Open Source Applications and Integration


Timeline of
Profitability
Summer 2010

Develop Core Application Suite for Sun


Advantage Mobile Phone

Winter 2011

Full Integration of All Sun Advantage


Software
TimeLine of
Profitability
Summer 2012
Provide Mobile Sun Advantage Core
Applications
Free
Make Open Source for Review
Final Outcome
2015
Industry Leader In Server Sales,
Profitability and Growth
Sun Advantage Become Monetization
Strategy for all Software, Provides
Strategic Advantage
Sun Advantage Positioned for Mobility
and Future
Server and Cloud Computing Solutions
Developed due to low R&D and Vertical