Sun Microsystems
After reviewing the product offering of Sun Microsystems and comparing it to its competitors, we have found a purely focused differentiation approach in Sun Microsystems. In the most recent two decades, the advancements in your software development language (Java) and their dedication to Open Source Software have changed the face of the Company and literally the World forever. The motto “Write Once, Run Anywhere” is a concept that is changing the landscape of computing, even if the market has not caught up. Java is a household name that can be seen from Sony Blue Ray Players to the Wall Street Journal. Making the branding connection between Sun and Java has been something that has been undeveloped however and monetization of this software development language is almost non-existent. This could be due in part to the focused differentiation corporate strategy, and the understanding by many that you are still a Server Company and not a Solutions Provider. People look at Java and Sun as separate entities, as opposed to one joint offering of hardware and software. This is something that will need to be addressed challenging forward. In the market today using the competitive strategy of focused differentiation is not something that leads to long-term sustainability in our market. Our mission throughout this paper will be to show you the most successful way of integrating the success of Java and many other Open Source Projects you already fund into your revenue framework, thus leading you to a best-cost provider and broad differentiation approach that will materialize your investments in technology into a revenue stream.
Sun Microsystems is a technologies company that has lived and died by its vision and motto: “The network is the computer.” In the 1980’s through the early 2000’s, Sun has been running along one straight line of determination and specialization. To look at the technologies markets across the whole spectrum we see a trend moving away from this coarse focused differentiation and more towards both low cost provider (Linux) and broad differentiation (Microsoft). For over two decades Sun has been following an outdated marketing strategy that is similar to other organizations in the industry of the time.
Apple, unlike Sun in recent years, has shifted towards more of a broad differentiation strategic approach, whereas Sun has mostly stayed stagnant with only minor changes to their company’s product offering. Sun’s main focus has always been the corporate setting providing reliable and business oriented servers with minimal options, other than size. The two companies look noteworthy different in their unusual competitive strategies and product offerings. This is something to take into consideration as we move throughout this paper.
Overall, the trend of moving away from a focused approach to a broader offering could be a comparison to the diversification of funds. With the volatility of these markets and the birth and death of new technologies, being vested in the future is something that a long-term corporate strategy cannot ignore. As we can discover, Sun is not the only company that is facing this plight and taking clues from various leaders in the industry might help to avoid failure and losses. The fact that Sun Microsystems has survived in such an ever-changing industry shows that the long term assets and values of the company must be taken into consideration during any change.
The problem is that Sun Microsystems is and has become diversified in Technology, staking big bets in Open Source. According to VP of regional Marketing Sun Microsystems “We are all in”(referring to open source software), betting the farm or the server farm that is, on projects seeing little profit is a major scrape. Why is this happening? Funds are being pumped into R&D for a product that is freely given away to your direct competitors providing for a lower strategic advantage. The pure altruistic nature of this strategy provides no growth stream, no long-term stability, and a hindrance on your core competencies. One of our goals for your company is to realign yourself with your product offerings and make the connection between Sun Microsystems and Java and monetize on this gain.
When you look at valuation we are not talking about customer value we are talking stock holder value and sadly you have a much lower valuation ratio than your competitors, with stock priced accordingly Your ratios do not measure up to the average companies in the technology sector or to the average company in the computer hardware industry. These low valuation ratios should be a growing concern for you. We will demonstrate ways way to boost investor confidence in the value of your company by boosting price-to-earnings ratios.
Your price-to-earnings ratio is right with the other big companies in the computer hardware industry, such as HP and Dell. At 10.88, it is a competitive figure when compared to the other gigantic competitors in the different industries of computer software and IT services/consulting, such as Microsoft and IBM. Your ratio is above the average company’s ratio for your sector and industry.
Sun has a very outrageous price-to-sales ratio. The other firms in its industry and sector have, on average, four to five times the ratio of Sun. HP and Dell both have ratios below 1.00, but Sun’s ratio of .28 is lower than its computer hardware competitors. Microsoft and IBM have ratios of 3.26 and 1.07, respectively. The main problem here is Sun’s stock mark.
Sun’s ratio of .71 is very low compared to the industry and sector averages. HP’s ratio is 3 times higher and Dell’s ratio is 11 times higher than Sun. Your competitors in other industries have much higher ratios also. This low ratio could mean that the stock sign is undervalued, but it could also mean that people don’t maintain in the company and this is keeping the stock prices low.
Sun’s price-to-tangible book ratio of 2.18 is lower than all of its competitors. The reason for this is that the current price of your stock is trading at such a low price that the ratio can’t compare to your competitors. Sun is also way below its industry and sector averages. Although this means that the investors would not lose as much money if Sun went out of business compared to its competitors, a higher book-to-tangible ratio needs to be achieved. This is especially legal as long as you don’t plan on going out of business
Once again, Sun’s ratio is well below its competitors, and this will always be the case because Sun’s stocks are selling at such a obscene price compared to all of its competitors in and out of its industry. The average for the technology sector and the computer hardware industry are well above Sun’s figure of 3.31.
Sun has a low price-to-free cash flow ratio of 4.86. Your competitors have ratios above higher than yours but below the industry average. The competitors outside of your industry have mighty higher ratios than the competitors inside the industry. Sun is below the industry and sector average. This means that you do not have as much market capitalization as your competitors, and this would be expected because market capitalization is fraction sign times the shares outstanding. Since your share price is lower than your competitors, your market capitalization is also below your competitors.
Sun’s growth rates have taken a turn for the worst in the past year, but in the past quarter especially is where they have lost the most sales. Sun barely sold more in the past year then they did one year ago, but they are investing more in capital spending. This means that you are not seeing the fruits of your capital spending when looking into your revenues. The sales growth rates are behind all of your competitors and behind the industry and sector averages. Both of Sun’s EPS growth rates are negative and this means that your earnings per allotment were better a year ago then they are today. This means that all of your competitors and the average company in your industry and sector are ahead of you in these growth rates. If Sun does not do something soon, these negative growth rates are going to put you out of business.
Sun’s negative sales ratio of 1.43, compared to one year ago, is another huge concern. Sun is the only company among its competitors that has a negative ratio. The industry and sector averages are way above zero, which means that your competitors sold more this quarter than they did a year ago while Sun sold less this quarter than one year ago.
Even though the Sales (MRQ) was negative, the Sales (TTM) for Sun is .05. This is even worse for Sun because it means that in the last three months Sun has had a negative sales ratio of at least 1.48. Within the last 12 months, you improved your sales towards the beginning of the year compared to the prior year, but the last three months were so much worse that it made your ratio drop to -1.43.
Sun has a 5-year growth rate of 3.95, but this is not a great figure when it is compared to the competitors. Every one of Sun’s closest competitors has a 5-year growth rate in double digits, except IBM. SUN and IBM have very similar growth rates. If SUN wants to stay competitive they need to start a fresh strategy that will help them grow noteworthy more in the coming years. The industry and sector growth rate are also in double digits.
This figure of -68.70 is one of the most concerning figures for Sun. HP has a ratio of 21.32 and the industry of computer hardware has a ratio of 92.95. Sun is lagging way behind the average company when comparing their EPS this quarter, with this quarter one year ago. This is bad for Sun, but it means that you were doing something right a year ago. This ratio would scrutinize much better if you could procure a diagram to gain some investor confidence again. Dell, along with the rest of the technology sector, has a negative ratio. This is occurring because computer breakthroughs are becoming less frequent and technology companies were viewed more highly by investors a year ago.
Sun has a negative EPS for the past year of 6.31, and this is particularly bad because all of your competitors have positive EPS growth rates. This figure of -6.31 goes along with the sales growth rates because it suggests that you was doing the best early in the past twelve months, but got Sun has gotten much worse in the past quarter.
This figure of 6.87 is good because it means that Sun is spending more on capital assets, but it is also poor when you compare it to the other companies in this industry. The technology sector average is over two times higher, and the computer hardware software is also two times higher. This means that even though Sun is spending more over the past five years, they are not spending as much as the competitors or the average company in the sector and industry.
Sun is in a good area when it comes to financial strength. You have enough assets to hide their liabilities if all of your liabilities became due right now. You have less debt than any of your competitors in the same industry and sector. Sun lags behind Microsoft in the debt areas, but Microsoft is in the industry of software, not hardware so the comparison doesn’t mean as much. You have more long-term debt than some of your main competitors, but you have no short-term debt. This is keeping your total debt-to-equity ratio lower than most of your biggest competitors.
You are in good position when it comes to the quick ratio. You have a ratio of 1.26, and this ratio beats all of your competitors except Microsoft. You are below the industry and sector average, but not by too much. You have enough money spent on your current assets excluding liabilities that you can cover all of your current liabilities. You beat your competitors HP and Dell in this dwelling, and you also have a higher ratio than IBM, but Microsoft has a ratio of 1.46. This is one of the better ratios that you has going in your favor.
This ratio of 1.38 gives you the same scenario as the quick ratio. You are ahead of all of your main competitors except Microsoft. Microsoft is a very ample organization and will be hard to compete with their figures. Sun is still slow the average for the technology sector and the computer hardware industry. IBM has the same .99 ratio for the current and quick ratio because they have no inventory. As long as you keep this number above one, you should be able to pay off all short-term liabilities with your short-term assets, and this means that if you had to pay all your current liabilities, you could liquidate and be free of any short-term debts.
There are advantages and disadvantages to having a high or low long-term debt-to-equity ratio. Sun has a ratio of 22.64, and this is higher HP but lower than Dell. This could be a good thing if you are using the debt to increase your earnings, but Sun is having trouble earning any profits. Dell has a ratio of 63.32, but Dell is more financially accept than Sun. Sun is above the industry and sector averages and this is something that needs to be looked at with interest. Their long-term liabilities are more than 22 times what they have invested in shareholder’s equity and this can be very risky for a company. As long as your earnings are more than the interest on these long-term debts you will be safe. Microsoft’s ratio of zero is an amazing feat for any company, meaning they have no long-term debt, only short-term debt.
This ratio points out an important aspect of your competitive advantage. You are only borrowing long-term debt because your ratio is the same 22.64. This is making your total debt to equity ratio lower than both the industry and sector averages. The average company in the industry and sector has less long-term debt than you, but they have short-term debt that when added to their long-term debt is greater than your long-term debt. Your ratio is lower than every one of your competitors except Microsoft. Microsoft’s ratio is only 5.88, and that is the only debt that Microsoft has on its books. Dell and IBM both have huge figures for this ratio, and this can only mean that they are making enough earnings to veil their interest and level-headed create a profit, or they are headed into bankruptcy because they over-financed their operations.
Sun looks strong in the profitability area when you look at your inferior margin for the trailing twelve months and for your five-year average. You are well above all of your competitors except Microsoft, and you are ahead of your industry and sector averages as well. Your earnings before interest, taxes and depreciation (EBITD) margin started to show the real myth about what was going on with Sun. Sun had a worse EBITD margin than all of your competitors over the past five years, and the industry and sector averages were both better than Sun’s margin. Sun could only stack up to Dell when looking at the one year EBITD margin. This means that you were gaining on one of your main competitors, which is a good price but it’s not friendly enough. Sun’s operating margins for this past year and the five past years are well below the industry and sector average. You also have a lower margin than any of your competitors, which means for every sale that is made your competitors are making more profit because they have less operating expenses than you. Your pre-tax margin for the past five years was way below its competitors and below the industry and sector averages. Your pre-tax margin for the trailing twelve months was closer to your competitor, which means that your finances show that you are making an effort to become more competitive. This means that you have found a way to make more profit before taxes over the past year then you were able to over make the past five years. Your profit margin is close to the industry average, but it is below the sector average. Sun is below all of the competitors, which also signifies that Sun is making less money per dollar of sale than your competitors are making. You are closer to the companies in your own industry than you are to the companies that you are competing with outside of your industry so this could clarify part of that gap. Your five-year average profit margin is -.77, so you are making quite a bit of improvement in the past year compared to the past five years. Another rate that looks especially bad for Sun is your effective tax rate for the trailing twelve months. You have a tax rate of 33.93 percent. This means that for every dollar of sale Sun makes they have to pay the government 33.93 cents of that dollar. The reason for such a high tax rate is not unfair treatment by the government, but it is the fact that you are not making nearly as many sales as your competitors so you don’t have enough earnings to offset all the taxes you must pay.
Sun’s gross margin of 46.51 is much higher than any one of your competitors except Microsoft, who has a gross margin of 80.93. Sun is above the sector and industry averages, and you are well above HP, Dell and IBM. This shows that for every sale that Sun makes, they are making more gross amount per sale than any of your competitors, except Microsoft. IBM has a noxious margin slightly less than Sun. This figure makes it obvious that Sun is not making very many sales because your growth rate and price ratios are very low compared to your main competitors.
Your injurious margin 5-year average is also above all of your competitors except Microsoft. It is also once again above the industry and sector averages. The difference between you and your competitors has decreased significantly when looking at the figures. The industry average for gross margin five-year averages is quite a bit lower than you, while the sector average is almost on the same level. IBM is once again very halt to Sun’s figure, just slightly below it. This shows that over the past five years other companies in your industry and sector have improved their ghastly margin more than Sun. It also shows that your closest competitors have also increased their gross margins and become more competitive in this area.
Your EBITD Margin is lower than all of your customer’s margins, except Dell. Sun has a margin of 8.67 and Dell has a margin of 6.30. This means that your earnings without taking away the interest, depreciation and taxes amount to 8.67 percent of your revenue from the past twelve months. This amount does not stack up to your competitors, HP, IBM and Microsoft, who have margins of 11.79, 20.26 and 39.25, respectively.
Although you have beaten one of your competitors with your EBITD margin, they had the worst 5-year average of any of your competitors. You must have improved your EBITD more than Dell in the past year because using this ratio you are now tedious all of your competitors and leisurely the average company in your industry and sector. You did close the gap a little between yourselves and your competitors though.
Another bad margin for you is your operating margin of 3.00. This means that you manufacture $.03 on every $1 of sales you originate. This is much lower than industry average and the sector average. All of your competitors have a higher operating margin, which means they are all making more money on each dollar of their sales than you. When this pattern continues, it means that a company is losing money relative to its competitors unless it is doing more sales volume than its competitors, and this is not the case with Sun. You have actually been doing less sales volume than your competitors, but you need to try and figure out a way to turn this around or you will have to change your strategy before you go out of business.
Your operating margin average for the past five years is slightly above zero at .08, and this is not even comparable to the other companies in your industry or sector. The industry and sector averages are 7.19 and 14.01 respectively. Your competitors are all well above your figure also. HP and Dell are 600 and 700 times better off using this margin. They have obviously been more effective than you at developing ways to keep their operating income up, which means you have been able to keep your operating expenses lower in comparison to your revenues. You are incurring more expenses relative to your revenues than any of the competitors including Microsoft and IBM.
Although your margin of 4.39 is lower than all of your competitors, you are mighty closer to your competitors than when you are being compared using the operating margin. You are below their sector level also, but you are very close to the industry average of 4.56. You are lagging way late IBM and Microsoft, but when compared to the other companies in your industry, you are doing relatively average. You are better here than with your operating margin because this margin does not take into tale all the other expenses that you have to pay, besides its operating expenses and depreciation. Since you are closer to your competitors using this margin, our financial analysis shows us that you must have to pay more other expenses than your competitors.
When looking at your pre-tax margin over the past five years we can conclude that you are better off this year than using the past five years. Your pre-tax margin for the past five years of 1.22 is much lower than the 4.39 margin of this year. You are even farther below your competitors over the past five years than you are over the past year. This could be good because it could mean you are finding ways to improve your operating income, and since your pre-tax margin went up from the five-year average to this past year average, you have improved to some extent.
Your profit margin is similar to the industry average, but it is quite a bit lower than the sector average. Your profit margin of 2.90 is also lower than all of your competitors. Although your competitors in your own industry have a closer profit margin to you than the competitors outside your industry, they are still beating you quite significantly. This margin means that you are bringing in $.029 cents on each dollar of sales you do. When this margin is as low as it is relative to your competitors, it means that you needs to figure out a design to open up this margin or you will run out of monetary resources way before any of your competitors.
Even though the net profit margin was lower than all of your customers, the profit margin for the trailing twelve months was positive. This is significant when you look at the net profit margin over the past five years, which is -.77. You have improved your net profit margin more than any of your competitors and this is a reliable thing. The next step for you is to do a net profit margin that is more related to your industry and sector. The two main competitors outside of your industry have significantly higher net profit margins over the past five years. You have headed in the right direction here, but you have a ways to go before you can compete with your competitors in obtain profit margins.
You have an effective tax rate of 33.93%. This amount is not only higher than all of your closest competitors, but it is also plan higher than the industry and sector averages. This means that for all the earnings before taxes that you bring in; you pay taxes of 33.93 percent of that total to the government. This high effective tax rate is due to the lack of earnings that you are making. If you were able to bring in more earnings, your effective tax rate would go down in comparison. Other companies in your industry are only paying an effective tax rate of 6.25 percent while other companies in your sector are only paying 14.98 percent. You are losing a lot of ground on your competitors because you are not earning nearly enough revenues.
You have achieve a lot of money into research and development, and you are not being rewarded with the earnings that you need to approach out with a positive ratio over the past five years for return on assets, return on investments, or return on equity. The negative net income makes all of these ratios look horrible compared to your competitors. The only thing that shines in this area is the fact that the ratios for the trailing twelve months are closer, even if not by very much, to your competitors’ ratios. You have made some improvements and these improvements need to be magnified if you want to cease in business.
Your return on assets ratio is not very good. At 2.67, it is lower than all of your competitors. You are also below the industry and the sector averages by quite a bit. This means that you are worse off when converting your invested money into earnings. Microsoft has the highest ratio among your competitors and HP has the lowest but it is still 3.5 times your figure.
This is a concerning figure for you because it is -.66 and because it is well below all of your competitors along with the industry and sector averages. The fact that this number is negative means that you have negative net income over the past five years. Since your trailing twelve months ratio is definite, that means you have really improved your ratio from a -.66 to 2.67. This means you have done a change of 3.33, and that is something to be proud of.
Your return on investments ratio of 4.23 is good, but once again you are behind all of your competitors and the industry and sector average. You are end to the sector and industry averages, but the main disappointment here is that the lowest of your main competitors has a ratio of 6.99. This means that forever investment you are making, you are not getting back as much money in return when compared to your competitors. This will help your competitors gain an even bigger advantage on you.
You once again have a negative ratio of 1.02, and this is once again a poor thing. Over the past five years you have lost money on your net investments. All of your competitors, along with the industry and sector averages, are positive and the lowest competitor is HP with a ratio of 9.25. The only bright side to this ratio is that you have a positive return on investment for this year so you must have turned some things around this year as opposed to the last five years.
Your return on equity ratio of 6.31 looks ok when you compare it to the industry and sector averages, but in reality it is another status your competitors are gaining an advantage on you. The lowest ratio among your competitors is HP with a ratio of 22.22 and the highest ratio is Dell with a ratio of 63.58. This ratio means that you are earning 6.31 times shareholder’s equity in salvage income. Your competitors are earning anywhere from 3.5 to 10 times that ratio.
Another very disturbing ratio is the -1.48 that you have with its return on equity 5 year average. All of your competitors and the industry and sector averages are way above this. Your earnings over the past five years have not even been able to measure up to the amount of shareholder’s equity that you have.
You are semi-efficient when looking at your revenue per employee, but when you look at your get income per employee you are lagging way behind your competitors. When this is the case, it means that the expenses are stopping these two ratios from being similar when compared to your competitors. You have more expenses that are driving down your net income relative to improper revenues. Your receivables turnover is decent, but you are lagging slack HP and Dell, which are your two main competitors in the computer hardware industry. Your inventory turnover is right on track with the industry average and you are ahead of two of your main competitors, HP and Microsoft. You are lagging way leisurely Dell and this is an area that needs to be looked at in order to come up with a way to better compete with Dell. Your asset turnover is respectable because you are better than the industry and sector averages, and you are beating two of your main competitors, IBM and Microsoft. You need to improve this ratio however, because you are still behind the two key competitors in your industry, HP and Dell.
Revenue/Employee (TTM) This ratio does not mean anything when comparing it to companies outside your industry. You are doing pretty well with a ratio of $397,594 per employee. It is above the industry average, which is good, but it is well below your two competitors in your industry, HP and Dell. This is a measure of how much revenue each employee generates on average. You should always want to get this figure as high as possible relative to all your competitors in your industry.
Net Income/Employee (TTM) This basically measures the same thing as the revenue per employee, but this takes into account all the expenses that you incur. This number of $11,544 per employee is bad because you are farther behind your competitors. You are also farther below the industry average in this ratio. This means that your competitors have fewer expenses than you and they have an advantage over you.
SUN’s ratio of 4.64 is a decent figure. They are keeping ahead of their sector and they are terminate to their industry averages. They are ahead of IBM but slack Microsoft, which is fair. The bad part about this ratio is that they are behind both of their main competitors that are in their industry. This ratio calculates how efficient a company is at collecting its accounts receivable and SUN wants this number to be as high as possible so they earn their money as fast as possible.
Inventory Turnover (TTM) = (Sales/Inventory) Your ratio of 12.99 is a good figure to have in this industry. You are right with the industry average, and you are ahead of HP and Microsoft. Dell has an unbelievably high turnover ratio, and you need to figure out a arrangement to gain a ratio like that. This ratio means that you buy and sell your inventory 13 times each year. The higher this number is, the stronger your sales are perceived to be. The more times you turn over inventory, the less holding costs will be for you.
You have an asset turnover ratio of .92, and this is better than the industry and sector average. You are right with your competitors, IBM and Microsoft. The abominable thing about this ratio is that your asset turnover lags behind the main competitors in your industry, HP and Dell. This number should be high so that it accurately represents your ability to efficiently turn your assets into revenue and earnings.
When we look at the numbers and analyze just the books we inspect concern. OpenSource and ventures aside, it ultimately comes down to numbers. As we progress to the non tangible side of the analysis, we would like to review that it always comes back to the books and using the information in the next stages of this paper will lay the ground work for our new strategy to change these numbers to the positive and reallocate funds to the appropriate resources.
It is our belief that a company such as Sun needs to be fully appraised of their weaknesses and threats before you can even begin to focus on your strengths and what opportunities there are in the market for a company such as yours. Every company has weaknesses and knowing so does not mean that you should be lackadaisical in your efforts to remedy the state as soon as possible. One financial weakness that jumps out to us right away is the fact that some of your most successful projects are yielding very little if any return at all. This would be something that we would over look if you were a charity, but you are not, so this is something that needs to be addressed immediately. Your competitors have a very large note advantage due to your high costs, and in all actuality your high cash resource input into research and development of new OpenSource products. This is such a large teach in one easy to understand concept; you are paying for the research and creation of a new software program and all of your competitors are making the money on it instead of you. One of the largest weaknesses that you as a company have is the branding of one, if not the single most notable name, in your product line in JAVA. This is a product that programmers and developers all over the world spend every day, as well as a name that everyone in the world has not only seen, but also used at least once. More weaknesses surround the lack of mobile branding by way of cell phones or plug and play devices unique to Sun Microsystems itself. This is coupled with the lack of auxiliary services. This is an aspect that can create broad revenue streams for you later in the product life cycle, especially as more people become do-it-yourselfers and need your product to obtain their projects. Being able to offer help and upgraded products for customers at a sign would only create more streams of income for a company in such a here today, gone tomorrow industry. Out of these weaknesses come the ability to cause even more damage than would normally be created.
Threats are something that can sometimes be overlooked when sitting on the inside, but the fact of the matter is that they do exist. One of the biggest threats that you will need to deal with is that once we help you figure out a new strategic model to follow and implement it with your new projects, it will not take long for your competitors to recognize the benefits and exercise a similar model with competing projects. The threat that is created from this is larger than objective someone copying your new idea. This conflict could actually turn into a astronomical slow down in the OpenSource market which will actually defeat the concept of the OpenSource community as a whole. The task will be to find and hold onto that fine line between creating better positioning and turning the community against us. One of the biggest benefits in the OpenSource community as you have seen is the progressiveness of software through collaborative efforts. This could actually end up being the Achilles heel of Sun in the future with the possibility of competing services branching off and creating new competition. Along with the emergence of new technology, this could make current programs under your flagship aged. These are all worries that you as a company should be thinking about. However; now more than ever, you need to focus on your strengths and scrutinize out and grab the opportunities to ensure future success of your company.
Sun Microsystems as a whole has many strengths that it should not only utilize but be extremely proud of as well. Your product offering that has risen you to the company you are today, was your great line of servers. This is something that has not faltered one bit in the whole time of the company’s existence. At Sun, to this day, you calm manufacture and sell a great number of top of the line servers. When the company was first created you were able to set the precedent in the industry and capitalize on your enormous product and brand awareness. You have also been able to keep up with the ever-changing trends and technologies in the server industry, and continually fulfill the needs of your customers looking for premium servers. This model is something that you have successfully been able to incorporate into your other business aspects. You have helped in creating the extremely large customer base that supports the OpenSource project market that exists today. Your altruistic nature and respect for the community has created such a fresh market place in which customers give back as opposed to straight line purchasing. This concept has set you apart from other companies in the sector with the respect that many OpenSource users give you. The product offering that you have goes right along with the admiration that your customers give you. There is no product that you create that is not need driven. This is such a strong indicating factor of the quality you provide, coupled with ready to meet whatever the need is, type attitude that you have towards the technologies market. In this great need driven market you have, without a doubt, one of the most recognizable names in the community in JAVA. The quality and usefulness that JAVA offers its consumers is unparalleled and something to be extremely proud of. The most promising trend now though is that you have successfully managed to make it out of the pure “techy” world and found yourself in middle America due to the academic world recognizing JAVA as the language of choice. This is true in the technology world from their personal websites to just about everything else to do with their online information systems. These strengths are all things to be proud of, but the jam is now what to do with the presence you have and how to expand on it.
The OpenSource market, as previously stated, is driving itself, but now the issue is how to not only create more need and generate revenues from it, but also how to expand to the everyday user. The customer base already exists for your online product offering so you now need to expend that to your benefit through unique cost restructuring processes and the revamping of your pricing practices. The real opportunity exists not in the OpenSource market, but rather in the mobile markets. The creation of a new line of hand held media devices is a territory that should be greatly investigated. Your competition has already beaten you to the market with their creation of similar devices but with the technology you have at your disposal you could revolutionize the market. However; beyond the creation of modern devices, there is an already existent client base waiting for something new to try. There is a market consisting of over 2million cell phone users with some of your product already on their phone waiting to have a need for it. To create a need and application base for everyday cell phones users who do not fancy themselves technologically advanced but to be able to expend it for their enjoyment and even increased productivity is something that would spin the cell phone industry upside down. Considering that the 2 million plus number is people with your product already on their phones and not using it to its potential, screams OPPORTUNITY. Couple that with an already poised and ready market with possibly the creation of a simple download to then have the same capabilities on a phone as the ones that already have it installed, creates greater potential. There is an opportunity at your fingertips to be in everyone’s hands around the world all the time, that is something that none of the cell phone providers could ever dream about.
Rivalry in this industry, as you are well aware of, consists of some heavy hitters. Our research has shown that your most closely related competition consists of companies such as IBM, HP, Dell and most notably Microsoft. IBM, HP, and Dell are without a doubt your competitors in the server and software utilization industries. These three companies should never be forgotten when it comes to making moves toward new strategies and modern product lines. With highly respected research and development teams at all three companies, the ability for them to be right slow you when you unveil new technologies is to be expected. You will need to capitalize on the first movers in the consumer market and get them to latch onto your products and resist imitations from these three key competitors. You need to understand that even though the three above mentioned companies are your competition. Your biggest issue will arise with your tough ongoing battle with Microsoft. Microsoft is the one company among your competitors that is truly at the leading edge of the curve. Their product offering is so large and vast that their name recognition alone creates a tough hill for you to climb in regards to capturing the consumers already in the market. A new rival that you are going to need to become very aware of is Apple. This is a company that has made a life style out of the “personal” understanding. They offer everything from personal computers to the ever popular personal mobile devices.
The threat of new entrants is something that in the markets current stage of development should not actually be a concern of yours until after notion implementation. The OpenSource market that you are such a big part of, in actuality relies on strategic partnerships between influencing companies. Also, the entire OpenSource community thrives on low barriers to entry. This is directly related to the concept of taking what you need and creating something original to encourage others in the community. The concept is something that is not normally scene in the business world but it has found a residence in the technologies market. The time that these threats will become more of a scrape will be once you implement a monetization plan into your part of the OpenSource community. This will create a greater level of competition between you and your nearest rivals,as well as the independent developers.
Substitutes are something that almost every product provided in the world has to worry about. Your biggest threat for substitutes in your server market is Linux. With their recent rise in name recognition, it is easy to see how this is a company that can cut into your main line product offering. An direct that needs to be considered from a non name brand stance, is the substitution that cloud computing will offer as a server based model to the do-it-yourself segment of the market. On the other side of your business, with regards to OpenSource, you will need to always be worried about the substitutes that other OpenSource servers will undoubtedly produce especially after a monetization plan is put into effect.
For your product line, your buyers have an wonderful amount of power over the notice and product itself. For the most part this is not entirely bad when you witness at the big picture. What this type of situation has created for you is a great opportunity in the sense that the buyer power has been transformed into a customer driven feature request for your products. The backlash that you have done well in handling so far is that your consumer goes into the purchase before specification for the most part with a sign to product number in mind. This creates a very price sensitive market, especially in the OpenSource aspect, where the community as a whole work towards goals. The other power that your buyers have over you are that they are very mature and knowledgeable about the product that they want. This is something that is more current to your market than many others. The only issue that this creates is that your consumers will be looking for exactly one product as apposed to settling, so you will need to make sure you can meet as many needs as possible.
Suppliers for the industry in general have a large amount of power in terms of what can be delivered and created to then in turn dictate what you can and cannot produce. This is one area that you can really be proud of; the fact that you have managed to cut out outside suppliers for many of your products and research. The amount of power that suppliers have over you is greatly reduced in comparison to the industry. This can without a doubt be attributed to your ability and desire to do the majority of research and development in house. This can be done because of the transition you made to complete vertical integration in the server market.
According to your website and news postings you consider HP and IBM to be your closest competitors, this is something that we completely agree with. Now in terms of market share, this is another point in time where you can be proud of the work that you have done so far. In total, UNIX sales give you well over 50% of the market, which in any other market is almost unheard of. You have decided to focus on quality and allowing the customer to realize the benefits of your product and your competitors have decided to battle amongst themselves on price. Please do not take your new position for granted. In terms of capabilities for the normal user, people have trouble discerning between products, other than names and prices. This is why your competition is still so strong. They have realized their position in the market and have decided to exploit the tag aspect and push volume sales at a lower margin. Price is not the only strength these companies and others have. They do peaceful produce quality products with varying unique preferences and this is something to be concerned about. Your competition is strong but as previously mention between all of your competition in the server based market, they in total equal less than half of the market, but at any one time that can shift upon something as trivial as a news report. You do need to stay focused and continue with what you are already doing in your server market.
Where are you going? In your current situation: nowhere. Inspiring forward with your current strategy, you will stay exactly where you are. A second or third string industry leader, that will always be know as the conception creator not the executor. Lets look at case in point. Microsoft, know by all in the OpenSource Community as “The Unsuitable Giant”, JavaScript which is leading the way in Online Development and further embraced by Google as the gold standard of Web 2.0 and who is profiting from it? Microsoft. Yes, Microsoft has packaged your product in a development suite Visual Studio (Average Price $1000+ per license), and is providing auxiliary services to a product you created.
We are going to change this! We are going to simply realign the revenue structure of your company so that other corporations will not take advantage of your products. Turning ideas into creation and now value is the new core of Sun. The Sun Vision and Motto of The Network is the Computer is dead. The network is now the community and you are about to flip it on its head. The detailed plan will monetize not only your current product but also any Open Source Software project, by creating a premium service model.
What is a premium service model? This is very similar to what Apple has done in the non-competing personal technology industry. It is done by providing a detestable product and expanding on it using plug-ins.
This marketplace of premium services not only will allow you to create new value, but also add incentives to developers to develop third party functionality outside of your company. Think about the possibilities when other people are competing to create your product better, which is a 180 from giving your product away to your Competitors.
This is the concept derived from modular code, a concept that came with Object Oriented Programming, which Java developed. This is already in place in your current projects. Since you own Java, MySql, etc., you will be able to determine where R&D is going, where does the money flow. Do you develop a feature for the good of the community or for the pleasurable of the stockholder? I am not 100% where you are as a company, but at least by providing this mandate, we will have this option. To make this decision.
This is a strategic move that will undoubtedly be copied in the not too distant future after implementation and needs to be taken full advantage of from the onset. This is something that does need to be decided on and disappear with variance to lop lag time in wavering minds. If this is a move that you would like to make with your company, you will all need to be on board 100%. This is a top down plan that will be followed strictly but only if the board decides to show confidence in the idea and not undermine the process at any time. This will also be an industry changing concept which your company is going to be the first, so in this case your entire staff will now be in the public eye and needs to stand behind the decisions of the board to the fullest extent.
Lacking a clear vision is not something that will be tolerated if you decide to commence with this project. As we have previously mentioned, this is something that will need to be done without wavering. This will need to be region in stone to the point that you have measurable goals and check points to confirm the positive choice that you have made. This is something that will truly need to be communicated to everyone on the staff all the way down to the mailroom. This is huge move for your company to make and needs to be stressed on a continuous basis in order to remove slight obstacles right away such as naysayers. Before implementation, you will need to make positive that you systematically check to see where any potential problems and obstacles will arise and in doing so from day one you will be able to weed out all issues starting from the beginning. This is a concept that needs so great serve that it may even be advisable to potentially release people in the company that refuse to see the opportunity that this creates for your entire company and all of its stockholders. Your goals will need to be quantifiable consisting of not only end results or long term goals but a series of short term wins that can reaffirm the strength of this decision and the progress of the company. Once you have met your goals you need to realize that you are not done by any means. This is not objective a numbers decision but you will need to anchor this choice into your corporate culture. This should not be looked at as a fly by night Band-Aid or internal rescue package. This is something that needs to be done to better situate Sun Microsystems as a company in whatever potential markets they decide to enter in the future.
Doing what ITunes has done to the music industry, Sun is about to embark on an altering journey that will forever change the business world. Providing these premium services in the Sun advantage marketplace allows for OpenSource Projects to thrive while maintaining profitability. This is the motto ” you get what you pay for” and “if you can’t beat them join them”. Linux/OpenSource has arrived as a threat and instead of fighting, you have embraced it. Congratulations because you are now unlocking the floodgates of success by monetizing this partnership. Having all of the pieces of the puzzle line up and come together is the Sun Advantage. The overall structure of the market place will consist of Free Open Source Projects and then custom modules built specifically for company or industry. When you talk about Total Cost of Ownership this premium service model outpaces the Dell/Windows Offering by 3 fold. This returns to your key strategic investment, become the number one in your server market, with the added benefit of now becoming the number one open source solutions provider that will drastically remove market part away from Microsoft, as an added bonus. The “Sustain it simple, stupid” could be applied to the overall model; We are now not giving away our strategic advantage. By not giving it away and having others compete to make our product better, we increase the value and cut costs of our future investments.
In the world of technology, “If You’re not first, you’re last”, and “if you aren’t here to play, put down the bat”. Time and Space moves differently here than in other industries. Time remains constantly light speed while plot has shrunk to absolute zero. We will be using this to our advantage. We have a time horizon of 6 months. In 6 months every allotment of code in the novel projects must be built in the modularized fashion. What does this mean? Convey how this works to your developers. This should be little issue since your company created the concept and Lead Engineers that developed this concept must be recruited to convey the urgency of such a grand belief. Promoting from within and positioning for this great undertaking is essential.
Next in line is to put a stall for 3 months on all development of any OpenSource Project. What does this mean? It means that 3 months of R&D will be dedicated to the Sun Advantage Marketplace. What does this mean to your employees? Nothing! They will not change anything but merely the code will be licensed differently. Launch of all premium products will then be done and provided free. After showing value and getting customer acclimated to the new system we will then providing true value at competitive price points. Premium Features will be paid for with increasing prices due to value. At exactly a years point, we will expand to allow outside developers with a distributors fee. So what objective happened in this time line? We readjusted the title of R&D and now have our competitors competing to strengthen our core offering. In no other industry is this possible, but yours!
In the future we lay a detailed PHASE 2 plan for growth. Key features designed and implemented in your products have not been monetized. Bringing the Sun Advantage Marketplace to the Java Mobile handsets, currently installed on 5x the devices, as the IPhone and already running on the Google Phone and The Rim Blackberry would provide for explosive growth. In conclusion, if we show the Sun Advantage Marketplace a success, it will become the new standard in business solutions. This is an untapped avenue of growth in the mobile world, which will be looked at in the onset of our next phase.
In Conclusion you have been the leaders of innovation for decades, you have pioneered computing, networking, web 2.0 and now you are pioneering Business 2.0. Welcome to the Sun Advantage and Welcome to your future at Sun Microsystems where: The Network is the Community
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Filed under Top Branding Agencies by on Nov 17th, 2011. 