Jonathan Schwartz's Blog: We Think We Can

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Monday Jul 30, 2007

We Think We Can

Paraphrasing Henry Ford, "You think you can, or you think you can't - either way, you're right." That quote struck me as the perfect summary of our fiscal year 2007 performance. We did what we said we'd do a year ago.

As you may have seen, we've announced our fourth quarter and full fiscal year results (our fiscal year ends with the school year, in June). We exceeded the commitments made a year ago, to restore Sun to 4% operating profitability in Q4, and did so by delivering our single best operational quarter since 2001. On an annual basis, we improved Sun's profitability by over a billion dollars. A billion. We grew revenue, expanded gross margins, streamlined our operating expenses - and closed the year with an 8% operating profit in Q4, more than double what some thought to be an aggressive target a year ago.

We did this while driving significant product transitions, going after new markets and product areas, and best of all, while aggressively moving the whole company to open source software (leading me to hope we can officially put to rest the question, "how will you make money?").

And we're not done - not by any stretch of the imagination. We have more streamlining to do, more commitments to meet, more customers to serve and developers to attract. But it's evident we've got the right foundation for growing Sun - with real innovation the market values, as shown by Q4's 47% gross margins, the highest on record in five years.

I'll be with a variety of external audiences most of this week - and I'll summarize their questions and comments in a few days. In the interim... to our customers, partners, and most of all, our amazing global employee base - thank you for thinking we could.

You were right.

Keep thinking that way. You ain't seen nothin' yet.

Posted on 01:05PM Jul 30, 2007 | Comments[27]

Comments:

Congratulations Jonathan, and everybody else at Sun! I think that the company and all its employees deserve this bright SUN SHINE.

Posted by a on July 30, 2007 at 01:21 PM PDT #

Dear Jonathan Schwartz,

Congratulations.

Your results look good. Very good. The statements look not only good, but honest.And yes, it is over a billion dollar of improvement in one year, entering athe first year of an upward swing. Nobody ain't seen nothin' yet.

Warm, hearty and prayerful wishes that SUNW gets past the $60 mark of its glorious days of deserved value for its equity

Posted by Sivasubramanian Muthusamy on July 30, 2007 at 01:23 PM PDT #

Congrats. Lets continue this momentum.

Posted by prem on July 30, 2007 at 01:27 PM PDT #

Think we can? Heck, every Sun employee has proved that we know we can!

Posted by James McPherson on July 30, 2007 at 01:39 PM PDT #

Congrats Jonathan! These results look very good. Hope Sun can always keep it's promise under your leadership. I was expecting a much bigger revenue though, as Sun has introduced some awesome new products lately. Maybe they will have an impact next year?

Posted by Vivek Sharma on July 30, 2007 at 02:10 PM PDT #

Clear demonstration of how insights from operational effectiveness can help to achieve the company's strategy. Thanks Jonathan for driving us to the right direction.

Posted by Gopal on July 30, 2007 at 02:11 PM PDT #

Congratulations, Jonathan! Not only for doing well but for doing well with open source.

Posted by Amy D. Wohl on July 30, 2007 at 02:16 PM PDT #

Jonathan, Very nice work. I have been a long term shareholder who averaged down at Sun's low because I believed in the company. You didn't let us individual investors down. You proved to me today that SUN is heading in the right direction. Keep up the good work!!!

Posted by Richard Campbell on July 30, 2007 at 02:36 PM PDT #

Thank you Jonathan, Mike, Andy, John, Greg, Scott, and all of Sun (especially including unsung heros like Tor Norbye and Marc Tremblay). You consistently show that solid vision and strategy pay off in the long run. I can't wait to see your Rock processor, proximity communications and transactional memory technologies in the years to come. Sun is the only multicore systems company in the world - for today and tomorrow.

Posted by Kevin on July 30, 2007 at 02:52 PM PDT #

Jonathan, way to prove the naysayers wrong. The network is the computer!

Posted by Jeff Shattuck on July 30, 2007 at 04:34 PM PDT #

"The developer community thinks that you can not think that you can not." Sun has no other place to go but to go full steam with its' strengths and build a community driven product line. Sun has cut a lot of costs already, don't make it a habit.

Posted by Ashish on July 30, 2007 at 04:43 PM PDT #

We're the dot in the dot com again?!

Posted by Vin on July 30, 2007 at 05:52 PM PDT #

To rephrase Ford, true is what one believes. Congratulations!

Posted by M. Mortazavi on July 30, 2007 at 05:59 PM PDT #

Sun represents a good example of returning to profitability by choosing an Open strategy; several colleagues questioned it; congratulations;

Posted by J.F. Zarama on July 30, 2007 at 07:35 PM PDT #

Jonathan, You are a great leader.

Posted by Prince on July 30, 2007 at 07:44 PM PDT #

Thanks Jonathan! Excellent news. Some comment: I want to provide one strong suggestion. Sun Microsystems want to be again leader and there is one very good solution. There is need to acquire 512 core processor technology from Japanese researches. This is way how Sun Microsystems will become dominant in Top 500 supercomputer list. http://www.channelregister.co.uk/2006/11/06/japan_512-core_co-pro/

Posted by Girts Zeltins on July 30, 2007 at 10:42 PM PDT #

Other important thing: I want to suggest to Sun Microsystems to cooperate in GRAPE project! http://grape.mtk.nao.ac.jp/grape/

Posted by Girts Zeltins on July 31, 2007 at 12:51 AM PDT #

The best is yet to come. Asynchronous processing to provide almost analog circuit speed to digital processing, putting the 25K on one chip, taking over the volume desktop market in the world by running all those thousands of internet cafes in the third world countries with one T2 based server in each cafe serving thin clients connected to replace Windows based PC’s (the energy savings alone would be tremendous since they only pay about $4 a day for labor but much more for electricity), the Sun Nova computer running hundreds of Rock processors communicating through proximity communication, the QUARC (Quantum RISC Computer) processor that slowly displaces the SPARC processor and makes the SUN Super Nova possible to construct, etc… Google leadership must be crazy not to purchase Sun Microsystems now while the price is right and save 70% to 80% a year on hardware and electricity costs by immediately implementing T2 based systems running in black boxes. One year of cost savings alone would provide 100% ROI plus they could receive the soon to be 10% margin by selling SUN systems to other companies. Everyone buy SUN now before you miss the next big thing.

Posted by Lee Hepler on July 31, 2007 at 01:58 AM PDT #

"To be, or not to be: that is the question..."
William Shakespeare "Hamlet"

Today Sun answered this question: to be!

Next question: to be leader or not to be leader?

Posted by Serge on July 31, 2007 at 12:50 PM PDT #

Jonathan , I was believer in your open source strategy and still am , but looking at how MSFT is addressing the challange of open source , I am beginning to think that your strategy might fail. refer : Microsofts Tolerating Piracy strategy and open source

Posted by Niraj J on July 31, 2007 at 01:44 PM PDT #

Congratulations to everyone at SUN. Look, this is a great company with absolutely the best that IT technology has to offer. I think SUN still has to do a lot in terms of sales and after sales services. Jonathan is a super CEO and am very confident SUN has the brightest years ahead!

Posted by Dakota on July 31, 2007 at 04:07 PM PDT #

Johnathan, it'd be better to break down the revenue from Server, Desktop, Storage, J2ME license, Solaris, Middleware, Support. Anyone know where to get the information ? I don't believe customer want to buy your box because Solaris10...never.

Posted by Will on July 31, 2007 at 05:38 PM PDT #

Profit is way up, the band is playing and the flags are flying. Congratulations! But the only fly left in the ointment is surprisingly flat growrh. Well, not that surprising, given that it required near-miraculous performance from the troops to keep revenue steady while dramatically cutting cost (and personnel). You got the same from less ... trying now to get more from less only works if there is still additional fat to be trimmed. But after 5+ years of downsizing, any further cuts can only come from the muscle and bone. Hopefully the primary focus going forward is now more on growth than further cost slashing ... near-sighted Wall Street pundits to the contrary.

Posted by Nvrijn on August 01, 2007 at 10:46 AM PDT #

Tolerating piracy is not an open source strategy. Most businesses prefer writing quality code distributed under open source licenses and embracing the community's model rather than competing anti-competitively. Comments on LWN called this strategy a Pyrrhic victory for Microsoft. I much prefer the OpenOffice model of developing open standards and delivering open source software so customers and competitors can interoperate. Nobody is going to interoperate with you if they have to pirate your proprietary software to do it, even if you support piracy.

Posted by nobody on August 01, 2007 at 11:08 AM PDT #

not only for doing well but for doing well with open source....

Posted by Kevin on August 04, 2007 at 06:05 AM PDT #

I would like to congratulate you and the rest of your team for the record company performance. 8% YTY, and 47% in Q4 is quite the feat. However, monetaries aside; I still think that there is lots more that needs to be done. For example, SunSolve server needs updating (slow/sluggish majority of the time), along with the documentation server. And last but not least, you cannot, CANNOT ever allow your service department to forget/neglect support contracts, especially at the premium level. (I don't think that it was worth the $720 at all.) On top of all that - ZFS, one of Sun's latest and greatest innovations doesn't have a failsafe. Doesn't have a failsafe. Not one at all. How is that possible? If ZFS goes, so does your data (as I found out; which I am told essentially "tough luck for your backup server.") Now I am hesistant to run with Solaris for future file servers because at least with NTFS, there are bit readers for data extraction. Unfortunate to say, that was a major disappointment from Sun, with no offers for corrective action/fixing the problem that I am now faced with. 200 million tests and this wasn't covered in the design failure mode and effects analysis (DFMEA). Highly disappointing.

Posted by Ewen on August 05, 2007 at 01:04 PM PDT #

Congratulate with your great job. I hope that we will see more in next few months. Just remember that good company produce good services and great company produces great services.

Posted by Arven on August 06, 2007 at 12:27 PM PDT #