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Sun Microsystems, Fujitsu Team Up on New Corporate Computers

Posted on: Tuesday, 1 June 2004, 06:00 CDT

Jun. 2--Turning to an old friend amid a sea of sharks, Sun Microsystems announced a broad alliance with partner Fujitsu to create a new generation of high-end corporate computers based on the Japanese company's mainframe processing technologies.

Under the deal, both companies will jointly develop a line of computers, code-named Advanced Product Line, that could eventually replace much of their current computer servers. The first APL products are scheduled to debut in 2006.

Scott McNealy, chief executive of Santa Clara-based Sun, said in a news conference that the company will be able to take advantage of Fujitu's heavy research into mainframe computers and high-end microprocessors to complement Sun's own research and development. Sun is under pressure to reduce costs because it has faced quarterly revenue declines and losses for most of the last three years, and McNealy said the alliance would be a way to compete against IBM.

McNealy said Sun will focus its own resources on a different kind of processing. For the past year, the company has been pouring its time and money into designing chips that can handle has many as 32 tasks at the same time. Fujitsu, by contrast, is trying to make chips that can do a single task as fast as possible. Thus, Fujitsu will design chips for APL.

Both companies will sell APL systems starting in 2006 alongside Sun's current SunFire servers and Fujitsu's PrimePower systems.

The deal expands a partnership begun more than 20 years ago. Fujitsu designs microprocessors that are compatible with Sun's Sparc chip architecture, and it sells systems that use Sun's Solaris operating system. The new APL systems will also be compatible with Sparc and Solaris.

The deal puts to rest some rumors started more than a year ago that Fujitsu would buy Sun. McNealy said neither company would invest in the other, and that Sun's preferred way of doing business was to partner, much like its partnerships with Advanced Micro Devices to jointly develop the next-generation of AMD Opteron chips. In contrast to the deal Sun made with Microsoft to settle litigation with Sun, McNealy said the deal was not a break in strategy but an extension of one already in place.

"This is an acceleration of a partnership with Fujitsu that takes it to a new level of collaboration," he said. "We'll still have separate businesses, separate brands and separate research-and-development teams."

Competing against prime target IBM won't be easy. The company has just launched servers using its new Power5 microprocessor. IBM declined comment on Sun's announcement.

Texas Instruments has long made Sun's microprocessors and will continue to do so, but if the APL systems with Fujitsu-made chips take off, then Texas Instruments might see falling demand for the chips it makes for Sun.

"Sun has bigger competitors and so they're trying to compete with a virtual R&D organization," said Jean Bozman, an analyst at market researcher International Data Corp. "There were rumors Fujitsu would buy Sun, but this alliance is the style they like. It will help them cover more of the waterfront in computing."

The deal does carry some risk for Sun. The companies will slap their names on the same computers and compete against each other for the same customers.

"It's like HP and Dell competing against each other with Intel systems," McNealy said. "If it comes down to a customer's short list of Fujitsu and Sun, and IBM is not on the list, we're OK with that. Customers will have a choice."

Sun is counting on the APL systems to expand its market reach. McNealy said both companies would benefit since their respective sales and support staffs would be able to reach a broader range of customers by working together on APL systems.

Sun will maintain its line of UltraSparc microprocessors and its SunFire servers to target a broad spectrum of computing.

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