Transparency and Making Choices

Not long ago, I was sitting across from the CEO of a media company. He showed enormous pride in the social value of his organization - in delivering news to the world via a global team of thoughtful, award-winning journalists.

He asked what made me proud to be at Sun. Among a number of things, I said I'm proudest of the role Sun plays in making sure stories like his are told - "Our technologies, after all, are how your journalists file their stories, and we play a central role in how you present them to the world via the network." I am unreservedly proud of Sun's role in making the world a more open, transparent place.

Beyond professional journalism, the network is a social utility for the world's citizenry - whose digital cameras and cell phones and blog postings and emails form a tidal wave of transparency. We live in a world whose traumas and triumphs are visible instantaneously. Sunlight's not just a great disinfectant, it's a wonderful safety net, too - you can't fix the problems you don't know about. But once you know about a problem, even small attempts to help, multiplied over the long tail of the internet, can make an extraordinary difference.

Over the past few days, the world has watched an earthquake in China lead to the death and dislocation of countless thousands. The San Francisco Bay Area, where Sun is headquartered, has felt the impact deeply - beyond co-workers, friends and family, we've suffered our own traumas with earthquakes. A cyclone in Myanmar triggered similar thoughts among those of us effected by hurricanes in New Orleans, Louisiana.

But the world's an increasingly transparent place. And any help, from $1 to $1m, multiplied over the world, makes a difference.

Which is why I'm sending personal funds to the relief organizations I trust to bring aid to those stricken.

And I'm encouraging you to take the time to make a similar choice.

Posted on 09:09AM May 18, 2008 | Comments[39]

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JavaFX as Rich Internet Application Platform

JavaOne wrapped up on Friday. We hosted individuals from across the globe, and from every industry: consumer electronics and gaming, to enterprise IT, space exploration, factory automation, the automotive industry, academia - like the network itself, Java delivers something for nearly everyone, everywhere.

This year's biggest announcements centered around Java's role in the future of rich internet applications (or RIA's). What's a rich internet application? It depends on your perspective - from mine, it's any network connected application that persists in front of a user, typically outside a browser, that can operate when disconnected from the network.

On the one hand, I'd claim Java's always been a RIA platform - before the world really wanted one. Early Java applets delivered interactivity, but at the expense of development complexity and, in the early days, performance - when a browser, and more recently Javascript, would suffice.

But browser based applications are hitting complexity and performance limits, and content owners are striving for higher levels of engagement (via high definition video, or advanced interactivity). Developers are demanding something new - the browser's a wonderfully accessible programming model, but it's a weak deployment model for rich/disconnected applications.

An unspoken driver of RIA is also business model evolution - many companies behind rich applications are seeking independence from browsers and search engines, whose default settings and corporate parents present a competitive threat. There's a growing appetite for locally installed applications that build rich, direct and permanent engagement with consumers. No one wants to pay a toll to meet their own customers.

With that in mind, as we looked to reinvent the Java platform, we heard a consistent set of requirements. And not just from coders, but from sports francishes seeking to directly engage their fans, media companies wanting to bypass browser defaults, to artists and businesses and device manufacturers - everyone's looking to uniquely engage consumers via the network. These audiences have nearly identitical requirements for a RIA platform - they want technology that:

• Reaches every internet consumer - on desktops, mobile, and new devices, too.
  
• Delivers high performance - and the ability to engage creative professsionals in the design process.
  
• Leverages existing skills and enterprise infrastructure.
  
• Is totally free, and open source.
  
• Provides content owners with control and ownership of their own data.
  

At JavaOne last week, we addressed every one of those issues - here's how:

First, RIA developers want to reach every consumer on earth, and on every device.

Why? Because the market is in front of consumers - no matter what screen they may be using. Desktop, mobile phone, personal navigation, digital book - you name it. The market's in front of all the screens in your life, not just a PC.

That said, on PC's alone, Java's popularity has grown in the last few years, as measured by runtime downloads - we routinely download 40 to 50 million new Java runtimes a month, and update more than a billion every year. The adoption of the Java platform exceeds the adoption of Microsoft's Windows itself - Sun's Java runtime environment (JRE) is preloaded on nearly every Windows machine (from HP, Dell, Lenovo, etc.), but also runs on Apple's Macintosh, Ubuntu, Fedora, SuSe, Solaris and OpenSolaris desktops. In addition, a JRE is present on billions - yes, billions - of wireless and mobile devices, from automobile dashboards and navigation devices, to Amazon's Kindle (did you know Amazon's Kindle is a Java platform?).

Which is to say, the Java platform reaches more people than any other software technology the world has ever seen.

Second, RIA developers want performance, functionality AND simplicity.

Why? Because content owners and application developers want to engage consumers - and want to engage artists and creative professionals in the workflow.

Java's history with simplicity isn't perfect - which is why our teams have rewritten the applet model, and focused so intently on making the new consumer Java runtime environment (download a beta version here) exceptionally fast to load within a web page, exceptionally performant for complex interactivity, and trivially accessible to consumers. We've also simplified Java with a scripting language, JavaFX script, that enables creative professionals to engage with coders to create immersive experiences, while embracing the creative tool chain (from interaction design to pixel manipulation) used by the worlds designers and digital artists.

And I'm really pleased we've solved the desktop installation problem, by making JavaFX applets separable from a web page with a simple drag and drop (click the image above to watch this demonstrated). Developers can now bypass the browser to trivially install apps on desktops - once the applet's dropped on the desktop, content owners have a direct relationship with their consumers.

You might have also seen that we're adding full high quality audio and video codecs to Java on every platform on which it runs - resolving another gap for RIA developers, support for time-based media (click here for a demo of high performance video).

Third, enterprises want to reuse their existing Java skills and assets in moving to RIA.

Nearly every enterprise employs programmers with Java skills - it's still the number one internet language taught across the world, and found pervasively in global business infrastructure. As businesses move to engage their customers via RIA platforms, reusing existing skills, and connecting RIA's to existing systems, gives the Java community a unique ability to build from what exists - rather than attempt to replace it.

This familiarity also allows businesses and developer teams to focus on engaging with consumers - rather than irritating IT with new infrastructure requirements (JavaFX developers simply link to existing enterprise infrastructure, vs. requiring new systems for RIA apps).

Fourth, RIA developers want free and open platforms.

Why free? Because developers don't want to encumber their applications with royalty bearing dependencies, or use technologies that predefine where consumers might appear. You don't build developer communities around closed source, you build user communities - and this is an instance where developer selection and adoption will define the broadest RIA marketplace. JavaFX will, like all of Sun's software platforms, be made freely available as open source, and it'll be released via the GPL (v2) license.

And lest you think free and open software is the province of those with goatees and tattoos... we're seeing a rising tide of developing nations mandating free and open software in government and academic procurement. Why? To protect choice, and build indigenous opportunity - there's no reason to build dependencies upon proprietary software if you can avoid it.

Lastly, lets face it, the real value in Web 2.0 is the data - not the app. And that data is YOURS.

If you've been watching the social media space as carefully as we have, you understand the value of instrumentation and intentionality in building a business on the web. Knowing what users are doing with your product, whether it's a fantasy cricket league or a consumer banking application, enables more innovative business models, the delivery of higher value services, placement of more valuable ads - data allows for better decisions, and better value creation (and bluntly put, higher CPA).

But most rich internet applications are built, then deployed - into a fog. Developers who leave the confines of the browser either lose access to information about what their users are doing, or have to rely upon a technology provider that's inserting itself into their data stream. And some of those technology providers compete with content developers.

With a project code named Project Insight, we'll be instrumenting the Java platform to enable developers to harvest the data stream generated by their RIA content. JavaFX developers can focus on their business models - rather than enhancing someone else's.

_______________________

With all that said, what's the success of JavaFX worth to Sun?

By definition, it's worth more to Sun than the adoption of someone else's platform (known as "positive option value") - and the proprietary infrastructure used to serve it (don't forget, RIA's have rich internet back-ends (RIBs?). And in the RIA world, all the options are going to be priced at free, anyways - this isn't a contest to be won on price.

From where I sit, the platform likely to win will be the one that sets developers free - to pursue markets, opportunities and customer experiences as they define them, not as vendors define them. Now, setting developers free - that's where we can excel. It's in the DNA of everything we do.

For developers, learn more at JavaFX.com. And be sure to check out NetBeans - like Java itself, it's starting to rock the free world...

Posted on 10:59PM May 13, 2008 | Comments[41]

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OpenSolaris, Amazon, MySQL and Glassfish... Clouds Parting

We made some big announcements this week at our annual developer forums, CommunityOne and JavaOne. I thought I'd highlight a couple in particular.

We announced the first commercial release of OpenSolaris - targeting high speed developers and development teams (not consumers...). OpenSolaris focuses on developers wanting to be freed from proprietary software models, who see innovation and automation in operating systems as a source of competitive advantage.

If Solaris 10, OpenSolaris's older brother, is for IT departments prioritizing carrier grade stability over rapid innovation, OpenSolaris targets the exact opposite - developers, from high performance computing to social networking, that prioritize a constantly refreshing repository filled with community innovations (and ZFS-based automated rollback) over an unchanging qualification target. Go to OpenSolaris.com to download a free copy, or click on the OpenSolaris logo to have a bootable CD delivered to you (free of charge). Or if you want a simpler way of trying it out... just go to Amazon!

We also announced a partnership with Amazon, through which we've made OpenSolaris, alongside MySQL and Glassfish, available with commercial support on Amazon's elastic computing cloud. From where I sit, this is a profound change in the industry - the world's most popular database is now available, and commercially supported, as a cloud service. As is the fastest growing Java container, and a redefined OpenSolaris for the modern world.

The traditional software industry, first revolutionized by open source, next by software as a service, is now embarking on a third revolutionary change... infrastructure as a service.

Sure feels like the clouds are parting.

(And again, if you'd like a free copy of OpenSolaris sent to you on a bootable, "live" CD, just click on the OpenSolaris logo above.)

Posted on 10:32AM May 08, 2008 | Comments[34]

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Our Q3

We announced the results of our third fiscal quarter (Q3) on Thursday last week, and the results weren't what I, or any of us, wanted.

As you can read in the press release, we delivered $3.267 billion in revenue for Q3, roughly flat with a year ago. On that revenue, we delivered a GAAP loss of 4 cents (equal to the charge associated with the acquisition of MySQL, which closed within the quarter) - on that revenue, we generated around $320m in cash.

The low light of the quarter was revenue in the US - which declined year over year by nearly 10%, a big step down for a geography that typically contributes 40% of our total revenue. The highlight of the quarter was our India performance, up 30% year over year - and our chip multi-threading Niagara systems, which grew (billings) 110%.

We had growth in 12 of 16 geographies in which we sell, but a shortfall in the world's largest economy (and the largest in Sun's portfolio), is tough to make up elsewhere. So we showed no growth at the corporate level.

Despite a weak US economy, we still see growth and opportunity across the world. We are going to be making some changes as a result of the quarter, certainly, but not in our core vision or strategic direction - network infrastructure is being built out across the world, developers will continue to define its architecture and shape demand, and we will continue to position ourselves to drive and capture that market.

With that, I'll go through a few questions:

What happened in the US?
Late in the quarter, we saw a fairly aggressive slowdown - among smaller customers, and for larger systems (like enterprise servers and large tape libraries). As you recall, we left Q2 with a healthy backlog, lots of momentum, and feedback from customers that we were totally on the right track, so we were as surprised as anyone that deals started stalling in early March.

Why did big systems slow?
It's counterintuitive, but larger systems and purchase orders's are easier to slow down than smaller purchases. When you sell the systems and storage behind a big buildout, it's typically a long selling cycle, and a fairly long implementation process (systems aren't powered up the day they arrive). So holding off for a few weeks, either because you're spooked about the US mortgage crisis or because your CFO decided to put a pause on capital spending, is fairly straightforward.

And remember, our business is a portfolio - from high growth, low end blades and training services, to slower growth, high end enterprise systems an infrastructure software. There is no one system or product for all workloads, it's a portfolio.

So how are you going to adjust going forward?
We'll continue to diversify our business - geographically, and with the introduction of our Open Storage initiatives this past week and acquisitions like MySQL and Vaau, we'll continue moving into adjacent markets.

We also announced a restructuring plan, through which we'll be making targeted reductions in operating expenses. The net result will be the elimination of up to 2,500 jobs.

To be clear - we are taking assertive, and prudent steps to focus on growth opportunities, and to pull our cost structure in line with our business model. As we've done in years past, we're doing both - making choices to invest and disinvest.

Evolving companies are never done making choices.

Where did you grow in the quarter?
In 12 of the 16 geographies we serve - including India (up 30%), Brazil (up 20%), up in China, Russia, the Middle East, Canada, to name a few places. In general, the world continues to look to technology as a source of growth, automation and efficiency. Even our Wall Street business was up this past quarter.

On the product front, our focus on energy efficiency continues to pay off, with Niagara systems grew (billings) 110% year over year, and our newest (AMD, Intel and SPARC) blade systems growing at an even higher clip. The MySQL team delivered a great growth quarter, and Service revenues were up 3% (a major portion of which are software related, of course). Disk storage billings were up 6%.

Deferred product revenues were again up nicely, more than 25% - these deferred revenues tend to be for higher end systems and more complex configurations, with gross margins above the corporate average. Deferred Services were down, attributable to the ERP transition I mentioned earlier (we expect to recover that in Q4).

What didn't go well?
Enterprise systems, which were great growers in Q1 and Q2 (20% and 8% growth, respectively), were down in the quarter - and not specifically attributable to competition. We saw exceptional performance on our APL systems built with Fujitsu, and a strengthening partnership. Tape libraries were also down, although media sales were strong.

Given the size of both these line items, our higher volume lower end businesses were not yet at a sufficient scale to eclipse the slowdown on the lower volume, high end systems.

Why don't you just stop giving your software away?

Because we prioritize developer adoption. Let me give an example.

Last week, we saw a very high profile media company raise a considerable sum of money. They had not otherwise been on our radar. I sent a note to the head of our global sales team, given the fundraising had cited a growing infrastructure buildout, and asked if we'd made contact.

He said no, but we were immediately reaching out - and it turns out they're completely built around MySQL.

So before we arrived, before we were engaged, and before they began building out a large infrastructure, the MySQL team had scored a design win - ahead of the proprietary competition. What should we have charged them beforehand? No matter what it was, they wouldn't have used the product - startups and developers don't pay for software. But here's a diffrent question: what would we have paid them to select MySQL over the proprietary alternatives before embarking on a massive expansion?

Right question. We didn't pay them, the MySQL team earned their adoption.

Will they buy a license now? Maybe not, but we'll be well positioned if and when they, like Facebook or Nokia or the New York Times, do. And in the interim, it costs us nothing for the reference. I was with a bunch of startups at our StartupCamp this morning, and asked how many folks in the audience *didn't* use free software... no hands were raised. Why are we focused on startups? Because we're focused on all developers, in big companies and small.

How do you feel about the competition?
Just fine, we looked at the deals slowing in the US, competition wasn't our big issue - it's not that someone else was getting the purchase order, it's that no PO was being issued in the quarter. We're more exposed to the US markets, and potentially more exposed to discretionary purchases (although I don't really believe that servers are more discretionary than storage - they're converging). Avnet, one of our big distributors, had a similar experience in the US.

Why didn't you pre-announce the quarter?
We wanted to be sure, when we made our announcements, to have finalized our numbers and our plan to adjust our cost structure going forward. Given we're in the midst of an ERP transition, we were still finalizing work late into April. Secondarily, we needed to review our FY 2009 restructuring plan with the board before going public. We announced as soon as we'd met, reviewed and approved the plan.

How did you lose money compared to a year ago profit?
Well, although we generated a lot of cash in the quarter (more than $320m from operating activities), we also incurred a number of charges which reduced our net income. These included non-cash items related to stock-based compensation and amortization of acquisition-related intangible assets as well as other acquisition-related charges - all of which added up to 20 cents worth of charges.

Are you repurchasing your own shares?
We don't comment on buyback plans, but we'll report any potential purchases at the end of the quarter.

When will the US recover? Will the malaise spread overseas?
We build network innovation at Sun, we don't predict the global economy.

And with that, you've hopefully got a clearer sense of what we saw, and what we see. So I'll end on a particuarly vexing question,

"Why does Sun's CEO waste time writing that blog?"
Because I believe in providing clarity surrounding our strategy and operations - not just once a year in the Annual Report. I believe clarity behind our direction is useful for our shareholders, customers, partners and employees.

In good times, and in challenging ones.

________________

Safe Harbor Statement

Jonathan's blog contains forward-looking statements regarding the future results and performance of Sun including statements with respect to the effects of our restructuring plan, and expectations for deferred revenue. These forward-looking statements involve risks and uncertainties and actual results could differ materially from those predicted in any such forward-looking statements. Factors that could cause actual results to differ materially from those contained in such forward-looking statements include: risks associated with developing, designing, manufacturing and distributing new products; lack of success in technological advancements; pricing pressures; lack of customer acceptance of new products; the possibility of errors or defects in new products; competition; adverse business conditions; failure to retain key employees; the cancellation or delay of projects; our reliance on single-source suppliers; risks associated with our ability to purchase a sufficient amount of components to meet demand; inventory risks; and delays in product development or customer acceptance and implementation of new products and technologies. Please also refer to Sun's periodic reports that are filed from time to time with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2007 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended September 30, 2007 and December 30, 2007. Sun assumes no obligation to, and does not currently intend to, update these forward-looking statements.

Posted on 03:47PM May 04, 2008 | Comments[68]

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