There have been lots of stories and rumors about what might happen at my alma mater Sun Microsystems next week. For example, Red Herring has Sun Setting on Scott McNealy? and the Mercury News Pressures build for Sun Microsystems to cut costs with layoffs with McNealy as the sub-head.
Wall Street apparently wants another huge layoff round, at least 12,000 people (over 25% of the staff), but McNealy is resistant to the idea. Part of the rumor is that the board brought Mike Lehman out of his four years retirement to be CFO again is because he agrees with investors and has the clout, or whatever it takes, to force Scott on the issue. Investors have seen the company seriously lag the other big iron vendors in recovering from the dot com crash, losing market share and unable to return to real growth and profitability. I suppose they’ve seen what Mark Hurd’s done at HP, looked at the innovation at Apple and whatever it is that Palmisano’s done at IBM and can’t understand why Sun has yet to figure out a way back.
I’m not sure McNealy, Lehman, Jon Schwartz or anyone else in the executive ranks really has a good answer. But I don’t think chopping off such a huge number of smart people who know important technology so well will revitalize the company. If anything, another round of pink slips–at a time when demand for them is strong–may be the final straw that pushes the best still on staff to leave. Nor do I see how a RIF will sell more boxes.
Instead of cutting the headcount by so much, why not do something out of the box and game changing? Reassign 8-10,000 staffers to a supercharged professional services organization and Sun can finally compete with IBM and HP for all of huge systems deals that so often now they have to do jointly with partners. Certainly the demand is out there and the products are complex enough that customers want the help.
I remember a NetDynamics company meeting back in 1997 or 98 when we discussed the quarterly results. Someone asked why we weren’t adding more consultants on staff since customers were asking for help with what was, after all, an incredibly complex product. Brooke Sewell, our very experienced CFO, said that the margins on services were too low compared to license revenue and that, as a small and growing company, our resources were better used in adding to R&D.
Sounds a lot like Sun, and not surprising since they bought us later that year. But that quarterly meeting was the high point for NetDynamics as a product, including the follow on when it was replaced by the iPlanet Application Server. Don’t get me wrong, I’m proud of the work I did as product manager for iAS and of the team as a whole. But BEA and then IBM ate our cake, stole the market out from under us.
Why was that? For my money one of the key reasons (though there were several other important factors) was that these companies, especially Big Blue, could simply drop in a half dozen consultants within a week to the cutomer offices. We could never do that, even as part of Sun. I don’t really understand the rationale for never building the kind of colossal ProServ group competitors have but the leadership still has time–do they have the guts and imagination?
BillSaysThis 