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Sun Microsystems Touts Popularity, Not Profits with Java Software Platform

Posted on: Friday, 13 June 2003, 06:00 CDT

Jun. 13--During the past two years, Sun Microsystems' Java software platform has gained significant support, especially among cell-phone makers, who have adopted it en masse to enable phone users to play downloadable games or send e-mail.

At the same time, the Santa Clara maker of computer servers has reported poor financial results for the past two years.

Indeed, it's unclear whether Sun has really gotten much benefit from the Java technology, which theoretically allows programmers to write a single program that runs on any type of computer.

Sun has been pounding its chest about the virtues of Java all week at its annual JavaOne conference in San Francisco, which drew 15,000 developers.

But the company has been strangely mute about how the spread of Java, which resides on more than 1.2 billion electronic devices, contributes to Sun's revenue.

Java technology is widely used, in part because Sun decided early on to license the technology cheaply to anyone who wanted it.

Sun launched the programming language more than eight years ago in a bid to make it the lingua franca of the Internet and establish an alternative to Microsoft's increasing dominance of computing.

Programs written in Java could theoretically run on any computer that had a "Java virtual machine," a software interpreter that would take the Java code and translate it into instructions that the computer could process, regardless of which operating system it ran. The structure made Java "platform independent" and offered programmers a strategic alternative to Microsoft's Windows technology.

Rather than make Java proprietary like Windows, Sun chose to license it broadly in an attempt to make it a ubiquitous "open standard."

That decision was undoubtedly the right one in the battle against Microsoft, said George Paolini, a former Sun marketer and general manager of the Java business at Borland Software in Scotts Valley.

"The right decision was to build a larger ecosystem around the technology. But now Sun hasn't monetized the value of that ecosystem."

Sun had hoped to dominate sales of hardware and software products that use Java as it pioneered new markets related to electronic commerce and maintaining Web sites.

But while companies like Borland, IBM and BEA Software have reaped big sales in software tools and application server software related to Java, Sun hasn't enjoyed the same success, said Stephen O'Grady, an analyst at Red Monk in Bath, Maine.

"Java is a multibillion-dollar software business," he said. "Sun does generate software revenue from it. But within the Java community, Sun isn't a leader in the markets. Java is going everywhere now. But how much revenue ultimately comes back to Sun is an open question."

Though Sun might have made more money if it had kept Java proprietary like Windows, it would have risked rejection of the technology. "It's sort of a Catch-22," said O'Grady. "If Sun had positioned themselves better, Java wouldn't be as widespread as it is today."

Sun doesn't break out Java-related revenue.

But Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co., estimates that Sun makes less than $100 million a year from Java licensing, a small part of its overall $12 billion in revenue.

Sacconaghi, who does not own Sun stock and whose company does not have a banking relationship with Sun, says it is too hard to directly associate any of Sun's hardware or software sales with Java. Without specifics, it's hard for the financial community to judge events like Sun's announcement this week that it would spend money advertising Java as a brand.

Scott McNealy, chief executive officer of Sun, said in an interview last week that Sun isn't interested in making Java proprietary and is perfectly happy trying to make money by selling hardware and software to companies that implement Java.

Sometimes Sun's advantages as Java's creator seem clear. Java runs on more than 100 million cell phones, and cell-phone service providers have adopted it because there is a clear benefit in having a Java program written for one cell phone and having it run on any cell phone.

And it so happens that cell-phone service providers are among the most loyal buyers of Sun's hardware servers, which are the centralized computers that send data across the cell phone networks to the Java cell phones. Just this week, Sun announced that Vodafone, one of the world's biggest cell-phone service providers, had adopted Sun's SunOne software solution.

But while Sun pioneers changes and updates for Java, it isn't always a direct beneficiary.

Consider the online games business of Electronic Arts. The Redwood City game publisher creates the simple puzzle and sports games for its EA.com Web site using Java. EA even bought Sun servers running the Solaris operating system to handle the traffic for the simple games.

But with its latest "Sims Online" game, EA chose to deploy Intel-based servers that ran the Linux operating system.

"We wanted to drive toward a commodity infrastructure," said Marc West, chief information officer at EA. "We have Sun, Intel and HP machines today. Over time, we'd prefer to have just one or two."

Ultimately, if Sun hangs on to a small share of a very large Java market, the company says it will reap big benefits.

"This isn't being built by Sun," said Jonathan Schwartz, executive vice president for software at Sun. "This is being built by a community. We are interested in the rising tide. We aren't the only boat."

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(c) 2003, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News.

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