Sun bets big on AMD's Opteron

SAN FRANCISCO: Sun Microsystems Inc. is betting big on Advanced Micro Devices Inc.'s Opteron microprocessor, announcing on Tuesday it would offer an entire line of systems based on the chip, not just low-end servers as had been generally expected.

Money-losing Sun and its feisty chairman, chief executive and president, Scott McNealy, revealed the commitment at the company's quarterly product announcement press conference in San Francisco. The network computer maker said it will offer boxes with two, four, eight and more Opteron chips in coming quarters.

"We're not six years late this time," McNealy told reporters and analysts, referring to Sun's halting embrace of so-called x86 chips made by Intel Corp. and AMD.

McNealy's blunt response to a question summed up, in many ways, what the Stanford MBA, avid amateur hockey player and top-ranked CEO golfer has done before: reinvent the company he and three others founded as Stanford University Networks in 1982.

Sun on Tuesday overhauled much of its server line, unveiling the V20x server, which uses AMD's Opteron chip, and starts at $2,795.

"It's a commitment to have an entire Opteron-based product line," said Neil Knox, executive vice president of Sun's volume systems products.

The company also rolled out dual-processor B200x x86 blade server, and new versions of its higher-end offerings that use its new UltraSparc IV processor. It revamped not only its high end, but filled out the low-end server line as well. Sun also touted new and updated versions of its management software.

"They're positioning themselves in such a way that if the economy turns up, they can catch the opportunities wherever they may be," said Jean Bozman, a server analyst with market research firm IDC.

SQUEEZED FROM BOTH ENDS

The shift to industry-standard chips such as Intel's, the rising popularity of Linux and Dell Inc. squeezed Sun at the low end, while International Business Machines Corp. and Hewlett-Packard Co. exerted pressure on the high end.

The company has posted 11 consecutive quarters of declining revenue and has lost market share to rivals. But as the server market started to bounce back late last year, Sun in January posted a narrower quarterly loss on revenue at the high end of cautious Wall Street forecasts.

In the early 1990s, Sun struggled against lower-cost high-performance workstations that had until then been its bread and butter. McNealy steered Sun in a different direction, transforming the company into full-fledged computer systems provider using its own chip, and rode the boom-boom 1990s to their crest.

"The payoff (in research and development) is going to show big time here every quarter," McNealy said of the products announced on Tuesday and forthcoming ones.

Analysts will be watching closely for that payoff. Many on Wall Street remain skeptical, including longtime bear Toni Sacconaghi of Sanford C. Bernstein.

"We continue to believe that Sun is facing material structural challenges, and that its new initiatives ... are either too small or not likely to be successful enough to change the company's fortunes," he wrote in a note to clients on Monday.

For McNealy's part, he said he welcomed the feedback, alluding at the press conference to the frequent analyst calls last year for cutbacks, including Merrill Lynch analyst Steven Milunovich's unusual open letter to McNealy and the Sun Board calling for massive job cuts, hiring a chief operating officer, and giving the pugnacious McNealy a "make-over."

"Keep your cards and letters coming, especially the open letters," McNealy quipped. "I really appreciate those."

® Reuters