Jonathan Schwartz's Blog: The World Just Changed

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Monday Jan 22, 2007

The World Just Changed

By now you've read the press release, and you know that Sun and Intel are joining forces to drive Solaris, the NetBeans development environment, Java, and the Intel Xeon platform. You'll see ads that look like this in a few days:

The short form of the relationship is this - Intel has agreed to endorse and OEM from Sun the open source Solaris OS. Just stop there for a second. If you're an industry watcher, that's a pretty big change for the both of us. Intel has annointed Solaris as The Mission Critical Unix for Intel/Xeon. They're also endorsing, and we'll jointly be optimizing, the NetBeans and Java platforms, and working with us to fuel the communities from which they spawn. Again, if you're an insider, that's a big shift in the market - welcome to the community, Intel!

On the Sun side, we're agreeing to pair up our respective systems engineering teams to build a line of Xeon based systems - servers and workstations. These will augment our SPARC and AMD platforms, both of which have been growing double digits over the past year. We're broadening our offerings with Intel's Xeon, and certainly hoping to accelerate our overall growth - into our customers, and into Intel's. And not just in OS's or computers (don't forget, our view is that storage is coming our way, too).

Jointly, we'll build the market, work with ISV's and partners, and help support key customers - and invest our considerable resources to ensure mutual success. To be clear, this isn't about displacing one another's competitors, it's about getting as big a piece of the future as possible. The market's not shrinking, after all.

Perhaps the most interesting part of the relationship (at least for enterprises) is this: we're pairing up to do some collaborative engineering around larger systems (where larger implies greater than 4 socket - and no, I'm not talking about 5 socket). Optimized for Solaris and Java, of course, and leveraging one another's virtualization and performance technologies. Just to keep things interesting. Stay tuned on that front.

Which is all to say, just when you thought you'd had the industry all figured out, good things happen - and although the coverage in the mainstream media seems focused on our adding Intel chips to our product line, I'd like to believe the real news is that Intel has agreed to add the Solaris operating system to theirs.

But that's just me.

And to our new friends at Intel: congratulations! We're looking forward to working together! It's great to finally be on the same side of the market.

Posted on 12:45PM Jan 22, 2007 | Comments[61]

Comments:

I'm happy to see greater Solaris adoption and a bigger ecosystem, but I'd like to see someone from Sun speak about any changes in the AMD relationship.

Posted by Bill Hathaway on January 22, 2007 at 01:04 PM PST #

I just hope for >4 processors the solutions will be more elegant than the snoop filter and dual FSB kludge-festival Intel is planning for release later this year. Particularly since AMD is prepping Hypertransport 3 for precisely the kind of scaling you seem to be looking at.

Then again, perhaps you're privy to more long-term engineering roadmaps than I am :)

Posted by Rick on January 22, 2007 at 01:18 PM PST #

It may be time to update this page then: http://www.sun.com/secure/executives/realitycheck/reality-011207.html

Posted by Shawn on January 22, 2007 at 01:34 PM PST #

One thing i don't understand is the contradiction between your comments about SPARC superiority [see threads on Scoble video interview] and the announcement of partnership with Intel. Is this an effort for a healthier industry, broader virtualization development etc or something that it's excused in the corporate world of NASDAQ?

Posted by Titanas on January 22, 2007 at 01:43 PM PST #

Jonathan This is very exciting news! When I am ready to launch my product, I eagerly look forward to using Sun Startup Essentials for a SUN/Intel web-server running Solaris & PostgreSQL.

Posted by Micheal on January 22, 2007 at 01:44 PM PST #

To our new friends at Sun, What a great day! It was a privelege to join you Jonathan, John and your team in San Francisco for today's announcement. Thank you for the incredible intensity over the last few weeks to get the deal complete. At Sun there are engineers like we have at intel - engineers passionate about technology, engineers committed to doing great things for the enterprise of tomorrow. I'm anxious for your first Xeon products to being shipping, for the full line up we discussed today to be broadly available, and anxious for even better solaris and java on Intel. However, what I'm really passionate about is you challenging our teams to scale systems and create technologies that neither of us realize as even possible today. This is going to be great! Thanks from all of us at Intel. Pat Gelsinger Sr VP, Intel Digital Enterprise Group

Posted by Pat Gelsinger on January 22, 2007 at 02:02 PM PST #

Nice move.

Posted by Peter on January 22, 2007 at 03:17 PM PST #

Congrats on the match - looks like a great one!

Posted by Tom Raftery on January 22, 2007 at 03:18 PM PST #

Maybe that way we'll finally get quality drivers for gigabit NICs, wireless NICs, ICH native SATA and RAID with NCQ, hot-swap and all the other goodies supported. Sounds good, any way.

Posted by Mariusz on January 22, 2007 at 03:27 PM PST #

I'm crushed. Years of Xeon bashing are supposed to be instantly forgotten? This doesn't speak well for Sun's commitment to its partners. AMD helped turn Sun around and this feels like a real slap in the face. I don't think its too much to ask for Sun and AMD shareholders to be given an explanation on why this happened and how it will effect the entire range of Sun/AMD offerings.

Posted by benr on January 22, 2007 at 03:54 PM PST #

This is fantastic news. I'll be interested to see how the addition of Solaris will open doors and how it will affect Intel's work with Linux. Hooray for NetBeans and Java on Intel Architecture.

Posted by Gary P. on January 22, 2007 at 04:11 PM PST #

I like what Pat Gelsinger, Sr VP of Intel, Digital Enterprise Group commented "At Sun there are engineers like we have at intel - engineers passionate about technology...." People are getting excited about technology. If we are to get to the next level, we need to pool our resources and brain power to make it happen. Good going Sun and Intel! Here is to a bright and prosperous future for both companies.

Posted by Brenda Freedman on January 22, 2007 at 04:16 PM PST #

I am looking forward to seeing a next-generation processor interconnect that will take the 'twin-towers' to the future as well integration with next generation I/O interconnect (PCI-e) into a <u>cohesive</u> whole. In a sense HT v3.0 fits the bill better than the current un-scalable FSB solutions. At the same time it would be exciting to see grafting multi-core technologies within the Intel chips. There is definitely a lot of room for growth and indeed room for everyone in the market. A final note: IA32, AMD64/EM64T are kind of outdated as ISAs (they started looking more like the COBOL of ISAs...) I sure hope that the cooperation of your two companies will make possible a genuine next-generation ISA. Also Intel has to start embracing the multi-core paradigm more boldly and provide the tools for server and workstation class of platforms to benefit from it.

Posted by Michael E. Thomadakis on January 22, 2007 at 05:18 PM PST #

As a Sun customer who has a mixed shop of SPARC, AMD64, and IA32/IA64, I applaude the announcement. Now I have the opportunity to simplify my support business, of course, I'll wait to see the price (grin.) I see some people are getting in a tizzy about how this may affect the AMD relationship - I don't understand this. AMD hasn't been exclusive with Sun, why should Sun be exclusive with AMD? At my workplace, we use AMD systems and Intel systems for different workloads. IMHO, this is a complimentary announcement. I'm excited - now announce those systems! P.S. I'm especially excited to see Intel supporting Solaris. Hoping that this will shuffle down the value chain to Dell, etc..

Posted by Joe Q. on January 22, 2007 at 05:24 PM PST #

I think this development can only be good. A few hours ago I was very surprised. Right now it seems natural, even inevitable. And what about AMD? Certainly they understand competition.

Posted by Dan Cobb on January 22, 2007 at 06:11 PM PST #

The world will not change because SUN is going to ship some 2P Xeon boxes with Tyan or SuperMicro motherboards and some Intel CPUs. Judging from SUN's tiny shipment volume, the SUN+Intel alliance is not going to make a visible impact on the computing industry. The only thing changed is SUN Microsystems itself.

Posted by sharikou on January 22, 2007 at 06:17 PM PST #

Being a former worker of Sun, a now worker for Intel, and a big fan of Solaris, I am very happy to see official support for Solaris between the two companies (as well as a chance to possibly work on the OS again sometime in the future). However, I would like to offer advice to the executives to the first-level managers at Sun that you are going to have some worried, unmotivated SPARC engineers at your company from this announcement. The challenge for Sun is explaining to its employees on how the two CPU technologies are supposed to co-exist within the company (much more so than when an AMD partnership was first announced).

Posted by Jay Freyensee on January 22, 2007 at 06:28 PM PST #

Vow Jon... You are taking Sun in right direction. Let the world see some cool technology innovations from this deal. I am very happy to see this.

Posted by 192.18.43.10 on January 22, 2007 at 11:57 PM PST #

As a Sun partner selling Solaris at the low end can be hard, it shouldn't be but is. This alliance is just another small step (I'm sure you see it as a very big step!)which endorses it's credibility at the entry level space and will create more momentum for Solaris. It can only be a good thing for Sun. You might have to pull those hilarious videos of Dell/XEON bashing off the web though Jonathan!

Posted by Terry Cox on January 23, 2007 at 02:02 AM PST #

Unfortunately, the SUN+AMD partnership was a big market differentiator for SUN. SUN was seen as taking enterprise computing more seriously while still catering to the low power consumption 64 bit computing world that wasn't ready to spend the big bucks on Sparc everywhere. Now with low end Intel boxes SUN has become just another "everyone else" with the same vision. I realize that SUN is not "giving anything up" but now SUN is making high power consumption boxes with poor 64 bit performance and acting like if they market it enough we might care. So much for being different and standing out.

Posted by Scott Alan Miller on January 23, 2007 at 05:01 AM PST #

This reminds me of the good ol' days of DEC. Ken Olson didn't miss a chance to stand with anybody to announce an alliance/partnership/consortium/... Scott McNealy had a saying for this behavior: Those who can do; those who can't consort. The announcement yesterday is hollower than the one Sun made with much hoopla with Google. You couldn't leave a good thing alone; AMD in Sun servers running Solaris. I still shake my head as to what this alliance brings to the table? By your own comments on stage you said Solaris on Xeon is here today, so what exactly does this deal bring? This doesn't bode well for Sun at all, what next Sun ships Power5+ based servers because the market demands it? After all Power5 platform is pretty popular, why not apply the same logic.

Posted by Anantha on January 23, 2007 at 05:05 AM PST #

Hi Jonathan. Bringing Intel into the Solaris fold is a very astute step for both organisations. This should certainly help bring more Solaris offerings to a wider (and hopefully more productive & happier) world. It should also help in the collaborations between Sun and Microsoft. The user-community should certainly benefit from the ability to choose Windows or Solaris as their platform of choice and it will also help spur development of cross-platform software. Great news.

Posted by Jeff Turner on January 23, 2007 at 07:16 AM PST #

Have Sun thought on create a Niagara-style cheap processor? I would want to develop for Solaris/SPARC, but I do not have the economical resources to get a T1 machine... Should be nice providing a cheap T1 machine [of course, with no all the features, but full compatible] (with similar cost to a generic PC) to develop software and try it on the cheap computer and knowing that a full T1 machine is going to run it with no problems.

Posted by Ernesto on January 23, 2007 at 07:51 AM PST #

JS, I work at the largest hotel chain and IBM is running everything. The only thing I see that IBM has over Sun is they offer a free Database with the total package and a 1 number Support for all problems.

Posted by gil on January 23, 2007 at 10:05 AM PST #

I am very pleased to see this new alliance. I've been a big fan both of Intel and Unix/Linux for years, so this new agreement with Sun bodes well, I think, for both companies and for the market at-large. Sun is widely recognized as the leader in the Unix environment, and Intel in the Windows environment. Joining forces like this will cause both companies to stretch their imaginations & resources, which nearly always results in a win-win situation for both, and for their stockholders!

Posted by Brian Shaw on January 23, 2007 at 10:13 AM PST #

Way to go, Jonathan.. This deal proves that there are no barriers for passion and commitment towards the good of innovation..

Posted by Sridhar Yerramreddy on January 23, 2007 at 10:50 AM PST #

Jonathan and team: Bravo! As a vendor working hard to address the market from a "customer" point of view (read: platform neutral), the more transparency we see from the key hardware and software suppliers, the better! Also, tighter coupling between key hardware features, leveraged well by the OS suppliers, should yield immediate and strong incremental benefits for our mutual customers. I applaud both Sun and Intel for this important step forward.

Posted by Wyatt Starnes on January 23, 2007 at 12:15 PM PST #

This is great new for both Sun and Intel! Innovation needs teamwork.

Posted by 192.55.52.3 on January 23, 2007 at 03:28 PM PST #

Hi, Jonathan - Just off topic. What a terrific quarter you had ! Posting 3 cent profits etc.

Posted by Prince on January 23, 2007 at 03:54 PM PST #

Congratulations on a spectacular quarter, Jonathan! I shudder to think what *could have been* with strong sales leadership at the EVP and US levels. Perhaps the time will come when another Roebuck or Zander gets placed at that level. I doubt either of them would allow the reps to pay more attention to CRM, DMT, and the myriad other time wasters the sales force has to recon with. Congratulations to the sales force for pulling Sun up despite having to deal with such rigid, slow moving, process!!!

Posted by WhatNeedsToBeDone on January 23, 2007 at 04:21 PM PST #

For those that are crushed by this Sun decision, Sun and Solaris (even in the SPARC only days) was an indispensable tool for Intel's engineering teams. Early on, Intel enginners realized the robustness of Solaris OS and Sun technologies and continue to do so. There is a longer history than the recent AMD relationship. Not just old friends but kindred beings I would say. This is good news and I look forward to this partnership. Intel has a lot to contribute to the table, not just hardware but software as well. Way to go.

Posted by Jess Perez on January 23, 2007 at 04:26 PM PST #

Good move, this way Sun will have always the most performant X86 boxes, since AMD and Intel have differently timed product cycles, and one year AMD is better the other Intel ... Plus let the vendors play against each other and get better prices on the CPUs .. Only advantages. People who buy Sparc will not move to Intel to soon ... So much drama about processors I want faster hard drives !!! not CPUs !!!

Posted by Zoltan Farkas on January 23, 2007 at 06:27 PM PST #

Jonathan- To give you a little background about my situation - at my former 2 companies (A hosting company and a dot-com), we had purchased Sun equipment exclusively. With my most recent venture, we have switched entirely to Dell servers for the cost/benefit features. The Dell servers have been great and the relationship with Dell has been good. That being said, we are looking at alternatives for our 2007 planning to curb datacenter power costs and boost customer database performance for a new product. I've been following Sun's turnaround for the past 2 years - mainly through internetnews.com and news.com. I wanted to let you know how ecstatic and proud I was to see your financial results today. I am neither a shareholder nor a customer any more - but I love a good turn around story and I am glad to see your strategies really working. You stuck to your guns, put your neck on the line and the results show it. I think your overall execution and choices have been very good. You should be very proud of yourself and your team for that. Keep it up, and who knows- we might even switch back to Sun servers :-) --Chris

Posted by Chris Ueland on January 23, 2007 at 07:06 PM PST #

Jonathan - Congratulations to you and the entire team on a great quarter. Better yet, congratulations for yet another successful step toward turning around the Company. Now, what is the deal with the KKR converts? SUNW doesn't need it. I find it's a slap in the face. You see, in my many years of private investing, not one of these convertible deals has been anything less than a deal with the devil--at least for long-term shareholders. Remind us where was KKR when things were dark? Sure the rate appears attractive, and it's a well-respected name like KKR. But what most executives fail to see and will haunt shareholders is these converible deals become licenses to cycle/short the stock. It becomes an endless cycle of running the price up and down like a printing press for the convert holder. These convert holders have very deep pockets and use the converts as a hedge against their short sales like a perfect safety net. It's a scheme. KKR will know (and probably share info?) as to when the shorting will start/stop which gives it major control over the stock price for the life of the instrument. Wall St is very familiar with this "game." In fact, I dealt with it for years with Charter Communications. There, after the latest convert deal was struck, the stock was so over-short sold, the company along with Citigroup had to devise another scheme whereby the company registered more share so it could allow the shorts to borrow and short more. And when the company decided to buy-back some of the shares, shareholders had to pay and additional 50bps to induce the short-sellers to tender (they knew they'd get clobbered if they had to cover over 100 million shares short). I digess...like I said...deal with the devil. I've never seen a convert deal I've liked. In every case, it's a death sentence for existing shareholders. And after many many years of holding SUNW and getting kicked around a lot, we get rewarded with a convert scheme to enrich this convert holder? Still doesn't sink in? Think about it. Why else would KKR lend so much at such a low rate? Answer: Because it will extract a lot of money simply trading/manipulating the stock price up and down. $750 million in converts translates to approximately 130 million shares. The unfair advantage is it (KKR) knows when it's short-selling and when the selling will stop. Which is where it can/will accumulate and play both sides for years to come. It's a great money-making scheme for convert holders because other institutional investors know to stand clear of this gig until it's over (in this case 2012/2014). And here everyone thinks KKR simply has a new found love for Sun? Please. Conclusively, current and prospective shareholders should understand the stock price is probably going to make a major move up (post-deal..they always do) and then find its way back in an endless range-bound cycle. SUNW didn't need the cash, and I don't think the deal is in best interests of shareholders. No thanks. KKR wants to invest in SUNW? Then grab an oar and pay the current price in the equity markets just like everyone else. I'm really looking forward to hearing your response.

Posted by SUNW Private Investor on January 23, 2007 at 08:52 PM PST #

Now you know why - http://fakesteve.blogspot.com/2007/01/mcnealy-spotted-again-for-this-weeks.html

Posted by Fake Steve on January 23, 2007 at 11:11 PM PST #

Who owns Sun.com

Posted by Grant on January 24, 2007 at 01:58 AM PST #

Seriously, I don't see how this can be a bad move. Intel will be augment SPARC and AMD platforms and therefore give customers simply more choice. Maybe intel platforms will drain more power, but don't forget Solaris is now also targeting smaller company's with its latest release that might concider hardware costs a bigger concideration then power usage. As long as Sun keeps true to their own SPARC's as well, I don't believe people will be turned off. Congratulations Sun!

Posted by Lennart on January 24, 2007 at 08:04 AM PST #

Jonathan Schwartz, you are doing a wonderful job for Sun Microsystems. My hats off to you !! I have only one suggestion to uplift Sun even further: "Sun Microsystems should buy Xerox Corporation".

Posted by Shirish Pancholi on January 24, 2007 at 09:15 AM PST #

Interesting Intel (w/ Sun referrence) ad on page 9 of today's US paper edition of the London Financial Times. And I quote "Intel is embracing Solaris as the enterprise class mission critical OS for Intel Xeon processor based systems. Learn more at intel.com/sunalliance." Cool!

Posted by MN on January 24, 2007 at 09:53 AM PST #

Jonathan, This is a very exciting announcement as you point out. As the head of Intel Latin America and fellow blogger, I'd like to welcome Sun Latin America and the different country subsidiaries. We'll be happy to join forces in the region. Here is my point of view of the announcement: post on Ricardo's Blog.

Posted by Ricardo on January 24, 2007 at 10:10 AM PST #

I would like to second the comments of 'SUNW Private Investor' above. I've been a longtime shareholder and I cannot see any situation where a PIPE deal will deliver me value. Why do you need the money when Sun's cash position is healthy? If it's for a specific deal than superior terms can be nearly always be arranged on a specific case basis. What a kick in the teeth after years of patience. Sun management's performance has been horrific for (at a base minimum) 5 years running. Talk all you want about the big turnaround; a company exists for the benefit of its shareholders and 5 years of pathetic performance is inexcusable regardless of how shiney your new boxes are. None of your competitors flubbed so badly for so long and many of them have intellectual property based models too, i.e. EMC and IBM. So please don't pat yourself on the back too much you've got a loooooong way to go to be mentioned in that company. Please explain the PIPE deal in more specific terms than "we intend to use proceeds from this placement to pursue strategic opportunities for growth." You might be decent technologists but you are not smarter than the market. Please elaborate.

Posted by Steve on January 24, 2007 at 12:55 PM PST #

It is nice to see Intel to embrace Solaris. But how about SPARC Workstations? Are we going to see a new SPARC Workstation soon? Or, Ultra SPARC IIIi is the end of the road???

Posted by Aki on January 24, 2007 at 09:45 PM PST #

[Trackback] A little late on this one, but on January 22 Sun Microsystems and Intel announced a strategic partnership which will not only mean that Sun will be rolling out Xeon-based servers in the coming months, but that Intel will also be promoting Solaris as &#...

Posted by Fly the Network on January 25, 2007 at 12:12 AM PST #

Will Sun replace Texas Instruments with Intel to manufacture SPARC chips? TI has been manufacturing Sun Sparc high-end server chips, in a design partnership (recent example Niagara chip, 1.4GHz eight-core with 64GB of addressable memory) in their 200mm and moving to 300mm fabs. TI (Dallas) announced they are stopping internal development at the 45-nanometer node, closing their 200mm fab where Niagara is manufactured, cutting their R&D staff by 50% and thereafter will use foundry (TSMC …) supplied processes at 32-nm, 22-nm. This may inevitably negatively impact Sun Sparc high-end server chip development and manufacturing. This give Intel a strategic advantage over TI, the ability to debug an advanced chip process node in-house.

Posted by Ben Resom on January 25, 2007 at 02:08 PM PST #

Jonathan, I have a signed black and white picture of a house hanging in my computer room with a yellow sticky note attached which reads "Our house is your house". It is one of my most prized possessions. You have done well. If you are ever in Philadelphia....

Posted by Mickey Bailey on January 25, 2007 at 02:39 PM PST #

Cooperation is good. I am glad to see both company heads working to find profitable solutions to past problems.

Posted by Carl S on January 25, 2007 at 03:09 PM PST #

I too would like to have the KKR transaction explained in further detail, not addressed by either the relevant press release or the Q&A of "Sun's Q2FY07 Quarterly Results Conference Call".

I'm not certain whether it's entirely accurate, but this seems roughly equivalent to a normal loan with most of the interest provided as two blocks of call options for about 61 million shares each (derived from a closing price of 5.75 USD on January 22) with a strike price of 7.21 USD until 2012 and 2014, respectively. Obviously, KKR's main interest is the options part of the deal, but will that be for fairly straightforward or convertible arbitrage (using pricing inefficiencies, perhaps related to the cost of similar options on the open market, for which I have not done the math), or a more dynamic and more damaging scenario as described by "SUNW Private Investor" (I admit that I do not fully understand the example)? Neither of these alternatives appeals to me (in the first case, Sun is betting against a financial specialist, and betting that its stock price will do less well than shareholders would like; in the second case, enough has already been written). Concurrently with the KKR transaction, Sun has also performed hedge transactions to counteract share dilution, and even more transactions "increasing the effective conversion price of the notes", but none of these transactions have been specified.

Where's the "opportunity"? What didn't I understand about the financial specifics?

Posted by RJS on January 25, 2007 at 05:01 PM PST #

It's great to make this match before Valentine's Day. We expect that SUN & Intel will have a great honeymoon! wow!!

Posted by Rafter on January 25, 2007 at 07:09 PM PST #

Correction: I meant a strike price of 5.75+7.21=12.96 USD.

Posted by RJS on January 25, 2007 at 11:38 PM PST #

Second correction (sorry, and I'll shut up after this one): Maybe it's twice 48.5 million options at strike price 7.21 USD? I'm getting hopelessly confused by SUNW Private Investor's 130 million number, the press release's mentioning of the closing price on January 22 (more likely pertaining only to those warrants), and the hope that Sun isn't just giving money away or believing its stock price won't noticeably rise over the next years. What is Sun buying with this transaction? Please, some clarification that a mere programmer and/or a rather naive investor can understand (the why as well as the which)!

Posted by RJS on January 26, 2007 at 01:48 AM PST #

What next, Jon ? Itanium 2 to drive a stake thru SPARC ?? HP -PA-RISC; HP/Intel- Itanium;(No)HP/Intel-Itanium 2;SUN/Intel-Xeon ..................

Posted by Just curious on January 26, 2007 at 01:56 AM PST #

With what seemed to be such a great realationship with AMD any agreement with Intel appears to be in bad taste. Does Sun treat their customers as well as their partners?

Posted by Steven Goodman on January 26, 2007 at 02:02 PM PST #

Jonathan, Carl S, RJS - Perhaps this blogger better expresses my angst... http://www.bloggingstocks.com/2007/01/25/did-sun-give-kkr-preferential-treatment/ The reality is these convert holders typically use the underlying shares as a safety net when they "hedge" their debt. But really it's not hedging...it's a scheme whereby the debt-holder(s) short aggressively the stock and manipulate the price for trading gains. KKR doesn't seem to fit this mold which is why my interest is piqued. It's difficult for me to explain without writing a manifesto (like the previous attempt). The important take-away, is these convert holders get very little benefit in lending $700 million at .5% to .75%. In this case, I think KKR is borrowing $350M from a bank, which would suggest it's paying more than .75%...meaning it's lending at a loss vs. benefit? Well, (like that lovely old woman...bless her soul) whhhheeere's the beef?! Where is the benefit? Most naive people believe it's the romance of the stock price appreciating and the convert holder taking advantage of that appreciation at a later date. My experience with countless deals like this (a few e.g., CPNLQ, SIRI, ADCT, CHTR...), is they short the !@#$ out the stock over and over and collect substantial trading revenues all while operating above a short-squeeze safety net. Well, typically there's little risk of a short squeeze as most of these companies are operating under such tough conditions, it's hard to justify a squeeze/higher stock price anyway. But ultimately, the convert holder knows when heavy shorting will start and stop which gives it a tremendous advantage in controlling the stock price and profiting from the trading therein. Wise prospective buyers avoid equity with a converts over-hanging and existing holders no not to fight but wait for exciting lows and then compete with the short-sellers for cheap shares or join them in short-selling tops...before the process reverses and repeats itself for 2x the reward. ADCT is a great example of converts pestering an otherwise poorly-performing company. SUNW has just turned a corner but success isn't guaranteed. We can't imagine the competition is sitting idle and about ready to go from we're number 1 to we're numb. But again, without further explanation, it sure smells consistent with same-old convert deal I've come to know. Specifically with CHTR, I think Paul Allen did the convert deal to re-establish the shareholder base by psuedo-issuing shares at the bottom (via the convert deal and associated share lending program). It all makes sense as cable is finally getting its day in the sun, and those shareholders that suffered big going from $36 to $.88 are still waiting any semblance of a return. But CHTR didn't want to issue more shares at $2, so the convert scheme got the desired effect...cratering the shares with short-sellers while using the share lending program to facilitate shares into the hands of strong, supportive institutional holders. Holders that when the stock gets much higher, they'll be the driving force in refinancing(recapitalizing) the debt into equity. Amazing how THE most hated company is now so loved...[digressing with CHTR again]. I think more and more shareholders want an explanation for the deal. As with previous deals the lack of transparency adds to the subterfuge. So is this it, Jonathan, mum's the word? I'd really like to see you open up a blog on this KKR deal. Perhaps it's a proxy test vs. your sincere openness. When someone like KKR comes in the back-door at such a dubious time and under such dubious conditions, shareholders want answers. Sincerely, I hope you're not like Rob Nardelli responding with "next question." Silence would be preferred. But then again, why tip the hand of KKR if is just another variety of the scheme I present. My regards to all - SUNW Private Investor

Posted by SUNW Private Investor on January 27, 2007 at 06:26 AM PST #

How extraordinary to be witnessing this landmark strategy unfold while I am in a class about global leadership strategies. Your theme of meeting customers at the edge and bringing them toward the middle; and volume driving volume are outstanding conceptually and I believe you will triumph.

Posted by CeeRay on January 27, 2007 at 09:54 AM PST #

Maybe you can get Intel to fab your Niagara2 and Rock processors at 45nm with their super new technology?

Posted by Kevin Hutchinson on January 27, 2007 at 11:04 AM PST #

Goog Start with Intel. what ever you do , Make sure the Servers have more than Five Hard Disks(With a Decent RAID) Built in and a SCSI Out Port for a Tape Drive. This has been the norm in all Intel Servers all these years. Please dont make the Life of Sales guy in Field different by making something Unique. I doubt Intel Server buyers are used to buying external storage Disks.

Posted by D Lewis on January 28, 2007 at 09:49 AM PST #

As someone with a freind who has long banked on the eventual sucess of Sun and who has been very enthusiastic about your (Jonathon Schwartz) arrival, I am positively thrilled about the prospect for the continued rise of your stock. Great work, Mr. Schwartz and team!

Posted by Luis Razo on January 28, 2007 at 06:54 PM PST #

This is really a gaint leap for all the unix users. I could see solaris x86 overthrowing linux in coming years. This would really make a big impact in the market if use of solaris x86 is significantly promoted. Sun has to work harder for this realization because many of the cooperates are still reluctant to use solaris X86. Kudoz to SUN

Posted by Tony Kuriakose on January 30, 2007 at 05:51 AM PST #

Great work and all the best of success for 2 superb companies. I have a small minor request - specific to Solaris 10 x86 / 64... I want to use it, and am presently downloading it. I'll confess that SUN software is impressively well engineered. A credit to the firm, its employees & very talented coders. But I need a catalog of available applications...(both free and commercial codes). Where can this be found (esp precompiled apps for easy install like linux packages and windows msi/exe files). I want to use Solaris 10 x86 (evaluating to replace windows, and with better support infrastructure hopefully than Linux), and not really interested in developing on it (I am a mere physicist). Chat support for solaris 10 (presales apparently) was unable to find this, and it is not (easily?) found in the Sun Docs web page (http://docs.sun.com/app/docs/prod/solaris.10~8.45#hic) Any advice appreciated, else please have someone put a software applications catalog together (like Windows/DEC used to do) THANKS !

Posted by Mark Wendman on January 30, 2007 at 08:35 AM PST #

JS, Two thumbs up on the last 3 moves by Sun to partner with Intel for chips and DataDirect for multiple database connections. Also SeeBeyond was a very key buy bringing in new business in the health care sector. Excellent! Good Luck, MJ

Posted by MJ on January 30, 2007 at 09:13 AM PST #

Regarding the convertible PIPE equity, to dispel any notions of future manipulation by KKR, all we need to know is whether there is any covenent prohibiting short sales in the loan agreement, as is often done for public company stock secondaries. As for the Intel opportunity, I'm pleased (though I haven't seen it mentioned) that this deal indicates nicer alignment with Apple Inc., who also uses Intel (and Sun's ZFS, and DTrace, and Java). A natural combination of the two subjects could be that Apple, now explicitly showing a desire to better interoperate with Sun equipment, is also welcome to take a minority stake in Sun using their excess cash!

Posted by retiarius on January 31, 2007 at 01:58 PM PST #