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Mike Lehman, CFO, presented for Sun Microsystems (SUNW) yesterday at the Morgan Stanley/Nasdaq investor conference in London.

The new management team conducted a complete review of the company plans in April and they feel they now have a clear and desirable strategy. Four new products this year already have a $990M run rate. Most feel they are gaining share in servers, something the Company hasn’t been able to say since 2000. The Sun Fire X4500 Data Server also appears to be doing well, with a capacity of 24TB that fits in a 4RU form factor and breaks the $2/GB price/performance line.

Even though IT spending overall isn’t growing, Sun is focused on companies that are investing in the network, claiming that their growth is much higher than anywhere else. The claim is that they are focused on customers using IT as a competitive weapon and that they are meeting customers on their turf, something that other server vendors don’t do.

They are also trying to take a page out of the EMC play book and claim that they will run on any hardware [including HP (HPQ) and IBM (IBM)] to give customers an integrated environment. For some reason they claim that they are the only systems vendor with an OS of their own. This is true vis a vis Dell (DELL), but it is far less valid when talking about IBM or HP, let alone service products from Amazon (AMZN) or Google (GOOG).

The Company plans to generate 4% operating margin in Q4. Investors still seem concerned about cost reduction and efficiency. There’s a story about how they reviewed everything but it still feels much like those IBM reviews pre-Gerstner. Too many senior smart guys in love with all their projects and not able to be ruthless about making the hard choices. Schwartz probably isn’t the guy to get that done. The language remains along the lines of not “cutting too deeply” given all the great opportunity they have…

The returns from investments in open source come from allowing potential customers to try the products and then follow up with real sales. It attracts customers. Google's YouTube developed on an non-Sun platform and they totally missed it. It took Sun 3 years to engineer out code they didn’t own in order to make Solaris open source. By making it open source this should not happen in the future.

In the end, investors are still a little unclear regarding what Sun’s role will be in the enterprise and how their strategy translates into sustainable improvements in growth and margins.

SUNW 1-yr chart
SUNW 1 yr chart


Disclosure: Author has no position in SUNW

Source: Sun: Investors Still Looking For Clear Daylight