Sun Microsystems: Innovation and Technology

8:10 PM |

Part A: Sun Microsystems’ Corporate Culture

Sun Microsystems’ Corporate Overview
Sun Microsystems (JAVA), founded in 1982, operates in over 100 countries and serves a variety of markets including financial services, government, manufacturing, retail and telecommunications, as it continues to focus on a single vision -- that the network is the computer. Sun is a primary supplier of networked computing products, including workstations, servers and storage products. Company products mostly use the company's own Scalable Processor Architecture (SPARC) microprocessors and its Solaris operating system. Other core brands include the Java technology platform, the MySQL database management system, and Sun StorageTek storage. Computer systems accounted for 45% of net revenues in FY 08 (Jun.), storage 17%, support services 29%, and client solutions and educational services 9% (Standard & Poor’s, 2009).

Sun Microsystems’ Corporate Culture
As was noted above, Sun Microsystems is guided by a simple and straightforward vision - "The Network is the Computer". The corporation pursues its mission of network participation strengthening through shared innovation, community development and open source leadership. Sun shares its proprietary technology with its customers and partners in order to grow its communities, increase participation and build new markets, and maintains rewarding partnerships with some of the most innovative technology companies in the world, including AMD, Dell, Google, IBM, Intel, Oracle, Microsoft and Red Hat (Sun Microsystems, 2008).

Sun is a company with a long history of openness, both external with its customers, distributors, and vendors and internal within the company itself. The importance of open communication among all employees is deeply embedded in Sun's corporate culture - from the executive team and throughout the entire organization (Purdum, 2006).

In its effort to increase effective human resources utilization, cut the unnecessary costs, and support the informal and entrepreneurial atmosphere in the company, Sun was one of the first companies in the world who pioneered the telecommuting employment practices and fully adopted virtual work policies into the corporate culture. Since Sun Microsystems establishing its “open work” program in 1995, allowing new hires to decide where they’d like to work when they negotiate their offer letter, this approach proved itself to be very effective, bringing the following substantial advantages to the company (EDF, 2008): 
§  Increased productivity.
§  More competitive recruiting.
§  Lower real-estate costs.
§  Higher morale.
§  Better retention rates.
§  Less stress on the environment.

While Sun strategy encompasses efforts to remove technological boundaries and to make resources available to everyone, it announces the similar goals for its community investment programs. Identifying important connections between education, employment development, and inclusion in an increasingly information-driven world, company promotes wide collaboration between its business, local government, schools, and non profit organizations to bring people and possibilities together for the fruitful society progress (Broadbent, 2003).

As a bottom line, customers and community oriented approach creates unique corporate culture, allowing shifting from simply providing professional services to the individual and business customers to building new collaborative relations between all stakeholders (Seeley, 2006). Corporate governance and leadership is a major strength of Sun Microsystems. Company’s CEO, Scott McNealy, has successfully reorganized the corporate structure and motivated employees to bring outstanding professional results by making them feel personal ownership and responsibility for the company’s success.

Part B: A SWOT analysis on Sun Microsystems

SWOT Analysis Model
SWOT analysis is a basic, but effective model that serves as a foundation for the development of marketing plans and strategic directions. The SWOT framework accomplishes this task by assessing four dimensions: an organization’s strengths, weaknesses, opportunities, and threats. The major role of the SWOT analysis approach is to take the information from the environmental analysis and separate it into internal issues (strengths and weaknesses) and external issues (opportunities and threats) (Danka, 1999).

Graphical representation of the SWOT model is provided in the Attachment A. SWOT Analysis Overview for Sun Microsystems is presented in the Attachment B. We will review each dimension in more details below.

Sun Microsystems Strengths
§  One of the biggest strengths of the Sun Microsystems internally is its CEO and President Jonathan Schwartz. He succeeded in April 2006 a long-term CEO and Chairman, company co-founder, Scott McNealy, who stepped down after 22 years of corporate leadership (Pimentel, 2006). Jonathan is not afraid to take calculated business risks or listen to his employees’ opinions about problems the company is having (Hecker, 2008).
§  Sun corporate organization is strong and highly competitive. Its executive management team is stable, enthusiastic, and comfortable working together. With the acquisition of MySQL, it added to its strategic decision-making team strengths and has filled key executive positions in global sales and services, and green IT responsibility to complement a strong technical competency in hardware and software (Gartner, 2008).
§  Sun's R&D programs are intended to sustain and enhance its competitive position by incorporating the latest advances in hardware, software, graphics, networking data communications, and storage technologies. Over the past three fiscal years, Sun has averaged in excess of $1.9 billion per year of R&D. This level of spending, combined with a number of U.S. and foreign patents, provides a significant barrier for new firms contemplating entry into the computer hardware industry (Standard & Poor’s, 2009).
§  Solaris operating system remains at the center of Sun's hardware strategy. With all of Sun's server and client platforms running Solaris, the operating system continues to hold its market share lead in the Unix market. From the moment Solaris has been released in 2005, nearly 70 percent of its implementations were performed on competing hardware from IBM, Dell and Hewlett-Packard, and not on Sun’s own servers (Gartner, 2008).
§  Sun is a premier contributor of key technologies to the open-source movement. From OpenSolaris to middleware (GlassFish), DBMS (MySQL acquisition) and Java, Sun has delivered innovative code into various communities. It is expected that the open source software role will dramatically increased in the nearest future (Driver, Feinberg, & Weiss, 2008).

Sun Microsystems Weaknesses
§  Research and development spending and recent acquisitions and mergers have resulted in a broad product line for Sun. Trying to compete in many different product segments has spread Sun’s resources too thinly. The company’s lack of focus and limited resources create certain difficulties to compete effectively with any given product (Hecker, 2008).
§  In the past few years, Sun's financial performance was not very encouraging. Prior dot-com bubble burst in 2000, company was consistently profitable. Since than weak demand for its high-end servers caused the company’s financial losses of more than $5 billion. Sun was able to change the situation, pulling together six profitable quarters in 2007 and 2008. The latest financial crisis, however, has sent the company back into the red. In the last two quarters, Sun has lost $1.9 billion on $6.2 billion in sales (AP, 2009).
§  Although Sun Microsystems sells a wide variety of products, the company has always emphasized importance of the server market.  However, recently, Sun’s server market share has been on the decline, as competitors, including IBM, Dell, and HP, have gained market share. The server market has entered a new cycle that will drive a shift to lower priced systems, and this change, combined with overall slowdown in server demand might cause Sun Microsystems to lose market share even more due to its high-end server exposure (Reuters, 2008).

Sun Microsystems Opportunities
§  Sun Microsystems announced in November a plan to cut 6,000 jobs (out of its 33,000) due an increasingly hostile economic climate and competition from IBM and HP, among others. It expects to gain restructuring charges between $500 million and $600 million, $375 million to $450 million of which will be within the company's current fiscal year 2009 (O’Donnell, 2008).
§  Aiming to leverage opportunities and expand its customer base across its Emerging Markets geography, which includes the Middle East and North Africa region, Sun Microsystems announced last month the roll out of a regional telecoverage model. The model will help reach high growth customers, startups, and Web 2.0 companies in emerging economies, fueling Sun's drive toward profitable growth (Bawaba, 2009).
§  The only way for the company to succeed means further investments in research and development to produce innovative new products similar to its Java program. The computer industry is quickly changing and customers are looking for cheaper technologies that are easier to use (Hecker, 2008)..
§  Sun's pricing strategy should be perfectly aligned to its business strategy. It has already significantly changed toward greater simplicity and innovative pricing approach. Now, the company is in process of radical modification of its standard licensing model. For example, operating system Solaris is available at no cost to the consumers, and has no functional or time related limitations. Sun's “Try and Buy” program, combined with promotional approach to qualified startup companies and non-profit organization has already attracted new customers to the company’s products (Gartner, 2008).

Sun Microsystems Threats
§  The global economic recession remains one of the biggest threats to Sun's business profitability because the company relies heavily on big-ticket server and service sales, which many companies are delaying until the business climate improves. There is a long list of the big and small companies who announced the capital spending freezes in the “crisis survival” mode (Marcus, 2008).
§  The computer industry constitutes a highly competitive market. Sun must contend strong competitors, as IBM, Dell, Hewlett Packard, and Microsoft, in every aspect of its business. Microsoft, for example, continues to dominate software market with its Windows operating system and Microsoft Office, while Linux has increased its market share as a cheaper alternative, providing direct substitute to Sun’s products - Solaris and StarOffice. The highly competitive industry environment leads to extreme pricing pressure. Such competition continues to threaten Sun’s profitability and provides an ongoing challenge to product differentiation (Hecker, 2008). 
§  Workstations, as computers with a fast CPU and large amounts of memory and disk that target the professional user rather than the consumer, were originally seen as a faster, more powerful devices than PCs and, therefore, much more expensive. As personal computer prices continue to fall and PC computing power continues to raise, the gap between workstation and PC performance is closing, resulting in decreasing revenue from traditional Unix-based workstations (Spiwak, 2005).


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