The Gillmor Gang – Dan Farber, Robert Scoble, Dana Gardner, and a lurking Mike Arrington – are joined by Redmonk analyst James Governor in a dissection of Sun Microsystem’s consumer-driven enterprise strategy. Recorded Wednesday, May 7, 2008.

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Transcript

Farber: [0:08] Hello.

Gillmor: [0:09] Hello.

Farber: [0:12] I have joined.

Gillmor: [0:13] I am happy about that.

Governor: [0:14] Hi Steve, this is James Governor.

Gillmor: [0:17] James Governor?

Governor: [0:19] How are you doing?

Gillmor: [0:20] I am good. Dan Farber, you are there too, right?

Farber: [0:24] Yes.

Gillmor: [0:25] OK, so let’s get started. OK, this is Steve Gillmor, welcome to the Gillmor Gang for Wednesday. This is a special edition, hopefully the start of some daily shows and we are going to talk about Sun Microsystems today. Dan Farber, what was your take on the conference today.

Farber: [0:47] Well, I haven’t attended that much of the conference, what I did see were mostly the keynotes and the highlight of the conference was Neil Young getting on stage and talking about his archive project that is using Java and Blu-ray to capture 45 years of his life and music, so that was cool.

[1:07] But in the vendor sport arena, Jonathan Schwartz & Company introduced finally JavaFX, which is their competitor to Silverlight from Microsoft and Adobe AIR as a rich Internet application client, but also server and scripting language and media framework. And yeah, that was quite interesting.

Governor: [1:37] They had “Cocaine” on stage, JavaOne, that is right, isn’t it?

Farber: [1:42] I don’t get the reference.

Governor: [1:45] Well, it was just kind of funny, it is a very corporate environment and you are listening to Neil Young playing “Cocaine,” but it was just kind of interesting to hear that in the context of JavaOne frankly.

Farber: [1:55] Yes, maybe that wasn’t the best choice of songs for them.

Gillmor: [2:01] I think that they do have a certain culture clash between — I mean they seem to be wanting to leverage social media, but at the same time I think that social media has a tendency to get kind of messy and I don’t know that they — I mean I know for a fact that PR doesn’t have a real handle on this yet.

Farber: [2:24] Well, but just back to what they announced, they announced JavaFX and the idea there is, you’d say well they are starting from zero, they don’t have an installed base, but every machine, which is about 85% of cell phones and 90% of desktops and laptops, have Java installed. So getting JavaFX installed on these systems is simply a matter of just people clicking on the updates and they would get it, so that is pretty big advantage for them.

[2:49] And the other was Project Hydrazine, which is their rocket fuel notion of building a cloud-based service that they say that is kind of a mashup between Amazon’s Elastic Compute Cloud and what Google is doing with Analytics as well. So that is a pretty big change for them to say that they are going to go compete by building basically an infrastructure as a service play.

Governor: [3:17] Well, they tried before, I mean there isn’t anything necessarily new about that. I mean they…

Farber: [3:21] The big difference is that what they tried before was high-performance computing and trying to get a few startups, now they are really kind of going after by providing mail, storage, messaging, taking their whole communication stack, mashup tools and everything and really trying to become a developer platform for both developers and consumers.

Governor: [3:40] Absolutely right. I mean I am just saying that — I mean, hey, Sun’s slogan for longer than anyone else, “The network is the computer.” So one would hope that the cloud was something they would be reasonably comfortable with.

[3:51] I just want to say a little bit about the Neil Young. I mean from my perspective — and I was blown away — and I think one thing that we may not all realize is that actually he called them. So this was not like them calling Sony and saying, “Hey dude, have you got somebody that can kind of bring us some credibility.”

[4:11] This was Neil Young saying, “Look, it has been a labor of love for many years and I am really impressed with this Blu-ray thing and thanks guys,” and actually went and did that. So I was certainly impressed and something about that as well.

[4:21] I got to tell you I have been going to JavaOne now for, well longer than I would like to admit. I mean I guess we are talking 10 — in fact maybe even a little bit longer than that — years. And I have never once at the end of a keynote left going, “You know what, I have to buy something, I must buy something,” and that was what I came away with, because I think — and not just for me, I think I am buying my dad a PS3 and Neil Young’s life works. So you know that was kind of interesting, JavaOne driving an interview before purchasing decision.

Gillmor: [4:54] Obviously, the Neil Young aspect of this conference was, to say the least, exciting, sort of being in line with what has been going on in the whole social media space, but the fact that you are going to buy a PS3 actually trends more towards the notion, which I think Jonathan Schwartz has been sort of promulgating, which is that there is a connection now that they are finally realizing between this — and I don’t mean HE has been finally realizing this. Jonathan has been ahead of this for four or five years actually. They are realizing as a company now the potentials for harnessing the consumer space as a driver for the enterprise.

Governor: [5:45] I just hope that begins to be reflected in the revenues, because I think it is an interesting strategy. I could remember asking Scott McNealy — and this goes back probably again like seven years or so — and I said, “You know, you have got a consumer strategy without realizing it.” And he was like, “No, we don’t do consumer.” “But what about all these phones?”

[6:05] I think Jonathan, the opposite is true. Jonathan has been always very very aware that what matters is volume. Now the question is are they making enough money because I wasn’t going out to buy some Sun stuff, I was going out to buy PS3. So again, you need an awful lot of volume if you are going to be making money on those kinds of margins, but certainly consumer does inform the enterprise.

[6:28] I mean I think from that standpoint one of the interesting thing for me was, I was on the plane on the way out — Sun flew me out, they paid my expenses, premium economy on Virgin, I used some miles, I went in upper class. Anyway, I meet this guy called Chris Ohms and he is one of the senior engineers on the Solaris engineering team.

[6:54] And you know, he hands me this USB stick and a couple of minutes later, I am basically using OpenSolaris, the new version, which is actually really nice and I was using that as a laptop/desktop environment and playing with it. And actually I was very, very impressed with the slickness of it.

[7:12] And because of a recent experience where Windows took 15 minutes to boot up and I wasn’t able to do something I needed to do, I have been thinking that perhaps it is time to make this change. And while a lot of people went from Windows to Linux, I am seriously considering running OpenSolaris as a primary laptop operating system.

Gillmor: [7:32] Well, you can have fun with that and check back with us later. Why don’t you identify yourself, James, Dan just wants to know who you are.

Governor: [7:40] Yeah, well this is James Governor from RedMonk. We are an industry analyst company. We give away most of our content. We call what we do “open source analysis.” The [...] is all peer readership. We have been pretty aggressive about the use of social media tools and again I think that we have got a real handle on open source and open source business models.

[8:02] And so yeah, what are things about us, unlike some of my colleagues in other industry analysts firms, our policy is to disclose everything and I would also say that Sun Microsystems is a client of ours. And I think it is important that everyone knows that, just so they can turn the dial one way or another in terms of agreeing with or disagreeing with my analysis.

Gillmor: [8:27] Dan Farber?

Governor: [8:29] Virgin Atlantic International, sorry I am arriving at the airport here. So that is who James Governor is.

Gillmor: [8:35] OK great. Dan Farber, what is your take on the last quarter [that Sun had and how it relates to what we are talking about here?

Farber: [8:44] I think as James was saying, Sun has a fundamental problem that they have a great vision, but can they crank enough revenue. The whole idea is they have Java, they have all this other open source software now including MySQL, which basically provides the back plain for anybody building application.

[9:03] The question is how does Sun make money, will they make it in two ways? One is by people buying subscription for support. And a lot of companies don’t need it from Sun. And the second is by selling their infrastructure hardware and software.

[9:18] And while the demand for compute resources and all the things that they build is growing, they apparently are not intercepting enough demand especially in the United States.

Governor: [9:32] I think there is still a dropping off of the old Sun. So as a business, we are seeing growth in some of the other lines but I completely agree with you. It is kind of how much do you actually have to turn the ship around, but also I think it is worth bearing in mind, you know, look we are seeing they had a lousy quarter and that was 0.5% drop in revenues while the week before Microsoft posted its own financial results and we saw, I think it was like, a 24% drop in Windows revenues. Well, what a lousy quarter?

Gillmor: [10:09] Well, as one reporter noted, IBM went up in the same quarter. So they have been taking share on Smart Station the way…

Farber: [10:20] Yeah, the challenge for Sun right now is that they are in a big transition from their old businesses to their new business and their new business being, to be an infrastructure provider, both as an arms dealer — I mean selling infrastructure to eBay and others — as well as building their own infrastructure which is what this project Hydrazine and their Network.com service are about, because increasingly I think that Sun is going to follow the model that we are starting to see Amazon use, which is being an infrastructure service provider to anyone and try to do that more effectively and cheaply, and add high performance and flexibility.

Governor: [11:06] Well, I see a change, and that’s what this about. Yeah and again it is not exactly clear how those revenues are going to kick in. I mean the simple fact is that Amazon is having a great deal of success with its power computing, but you know, it is still not the kind of very significant revenues that are going to work. It might need the necessary effects on for example Sun’s bottom line.

Gillmor: [11:31] Mike Arrington, are you on the call?

Arrington: [11:38] Yeah, I have been listening quietly the whole time.

Gillmor: [11:41] All right, just so for the chat group, that was Mike Arrington who was complaining about the terrible audio. What we have got is an industry analyst who has been paid by Sun for his airfare on the way to the airport to go back to London and that is why the audio sucks.

Governor: [12:02] Yeah, it is a timing thing and I am sorry about that, hopefully it will be a little bit quieter here in the airport, but it can’t be guaranteed. If you want, I can drop off and come back in on a landline in about five minutes.

Gillmor: [12:12] No, no, I appreciate you being here. I am sure everybody does. All I am saying is that let’s just make do with the audio, the fact is that we have been get such interesting people in the same telephone conversation is a technical challenge and if you don’t like it, then hang up.

Arrington: [12:38] Hey, Steve or Dan, how do you think Amazon is hurting Sun, is Amazon’s web services hurting Sun’s market cap right now? Because every company I talk to, not just startups, have already started moving their data centers over to Amazon’s web services and that has got to be affecting Sun if Sun is not able to sell Amazon any equipment?

Farber: [13:08] Well, I think there is a couple of things here, Sun is selling Amazon equipment to run their service. So they make money on that end. And they just do the deal to bring OpenSolaris onto that platform. And secondarily I think Sun has been focused on much higher performance, you know, four or five 9s, not the kind of two 9s or three 9s that Amazon can deliver.

[13:31] So they are different market space, but I definitely that Sun is going to be headed toward that middle ground where they are going to try to be all things to all developers.

Gillmor: [13:42] The problem that I have been having with Sun for quite a while is that they seem to be like one of those three-card monte guys on the streets of New York. It’s like, or the pea, which one, where is the pea? Is it under here? No, it is not under there. Is it under here? No, it is not under there.

[14:02] You never quite understand where the money is going to be. It always is about the vision as Dan pointed out earlier. And you never see the actual payoff. I mean they have been limping along for four years since they were the dot in dot-com. I mean, Jonathan Schwartz I think is a brilliant leader and has articulated well before pretty much any CEO in the enterprise space, the coming firestorm of consumer technologies driving the enterprise, yet they don’t seem to be able to capitalize on it. James?

Governor: [14:51] Yeah, again, I mean I think the significant problem there is just they honestly got, they actually did get a little bit too fat on those revenues from the first dot-com explosion and they ended up with hardware that was just too expensive. And we are sourcing a drop off there. Linux has made a huge impact on their business. I mean, the question about whether Amazon is material in terms of share price and/or revenues.

[15:19] Linux has been the big problem because Sun not only shipped the really big servers, on these that’s not a lot of network service as well and a lot of that business pretty much disappeared in a very short space of time. It has taken a long, long time for them again to get some of that back. So I think that now they have done some of the important work to make Solaris the kind of environment that perhaps developers will begin to retarget in those kinds of environments.

[15:44] But certainly, I think that has been the heart of their problem. I mean at the end of the day, let’s get this straight, I mean air war and vision everything else, Sun makes its money from selling boxes and so they have to sell a lot of boxes and yes again, if people are building into the cloud instead, that is exactly why they need to do that as well.

Gillmor: [16:03] But they are getting hurt on the box side, I mean this last quarter, IBM and HP basically took away, what was it, 2% of their market share?

Governor: [16:13] Well again, I mean IBM just released its E10 Mainframe, which is a really nice box. A lot of customers have been looking forward to that. That pushed up their revenues nicely and then a lot was on the services side. So they do have a more complex portfolio. I don’t think it is easy.

[16:28] Frankly, this thing has been dragging on a long, long time. I mean the one thing I think in Jonathan’s favor, if I’m him and I am trying to talk to the street is at least there were growth businesses.

[16:39] And we are definitely seeing a significant uptick in some areas. I mean these Niagara boxes they are shipping, these multicore machines, they are selling really nicely. I think the one disappointment to me when I looked at the results, they should have been selling more tape. I mean, they bought Storage Tech and I think that that’s – they should have been really selling more of that. I think that was their opportunity to actually grow some right now because storage and archiving and compliance at the moment is just a very hot market.

Gillmor: [17:12] All right, so then the other problem is that they are selling into this social media kind of consumer epiphany kind of marketplace, and they talk about Java and JavaFX having such penetration and they are being boxed out by Google with their deal with IBM in terms of services and whatever that relationship is going to be. Dan was at that conference last week and so he probably…

Governor: [17:44] Yeah, what was that about? You mentioned it the other day. I don’t really know about that. I know that IBM and Google said something about doing something about cloud or something. I don’t think IBM gets the cloud at all, but we’ll see about that. But what’s the story, Dan?

Farber: [17:59] Well, I think for IBM the cloud is basically mainframes serving lots of virtual machines up that cheat for corporations. They don’t have a notion of providing more of a consumer fit. However, with Google, what they’re doing is working with Google to embed Google widgets and mashups into corporate applications. But they’re not selling Google apps or anything like that at this point, although I’m sure that’s where Google would like to head with that.

Gillmor: [18:27] OK, and then the other place where they’re getting boxed out is on the iPhone. Scoble, you and I were talking about this earlier. Are you still there, Robert?

Scoble: [18:37] Yep, I am.

Gillmor: [18:39] In handicapping which of these rich Internet applications frameworks is going to be on the iPhone first? Scoble, you think that Java will be the last one to be there, right?

Scoble: [18:53] Yeah, Java’s the least interesting one to put on the iPhone. Flash has some reasons that Steve Jobs would consider it. A lot of games are in Flash, but he’s clearly turned that one down. So, I think Steve has said “I’m not going to let another vendor control my destiny. I’m going to build my own developer platform, and I’m going to build it in-house. I’m not going to let anything external go on my iPhone.”

Gillmor: [19:23] So, James, do you see any kind of disconnect there with this attitude that they’re the S in social media?

Governor: [19:34] The S in social media, that’s great. I thought we’re talking about phones.

Scoble: [19:41] Guess what, I use friend feed about 40% of the time. It’s on my iPhone. So, if you’re just [...] and customer-level social software, my iPhone already has a dramatic adoption curve change there. Google reports that their services are seeing dramatic adoption level curves on the iPhone compared to any other device.

[20:05] So, if you’re not on the iPhone, you’re getting locked out of a whole set of things. The adoption models, people, influencers, developer platforms. Steve Jobs says he wants control.

Governor: [20:21] Yeah, and that’s right. But there are still other companies out there that have backends that they can’t sell to. I mean, Sprint and all of those companies will continue to sell gear, whether it’s…

Scoble: [20:30] Yeah, but people who use Sprint phones don’t use the Internet in anywhere close to what the iPhone usage model is. Until we get phones from Nokia, LG and Microsoft that come close — because I have a Microsoft phone and it sucks for the web. I can’t stand using it. I have a Nokia phone that cost $550 that sucks for using it on the Internet. I never use it. I has a frickin’ GPS, it has a five megapixel camera, but it sucks for using it on the web.

[21:02] My iPhone, the reason I keep it in my life is for the web. It’s for the consumer Internet apps like stocks and app and web apps. Until somebody comes out with a phone that is decent to use on the web, it’s over.

Governor: [21:20] I’m not going to disagree with that. I think that the iPhone experience is great. I have an N95 mostly because of the video. I have a young kid, I have a two-year-old, and the quality of the video is why I use it. I do use it to access the Internet a lot, that’s my phone.

[21:35] But I certainly understand, in Silicon Valley more than anywhere else, the huge concentration of the iPhone and that’s a very significant factor.

Scoble: [21:47] Not just Silicon Valley, either. I was in…

Gillmor: [21:51] Robert, let him finish.

Governor: [21:54] Let Scoble finish or me?

Gillmor: [21:56] You.

Governor: [21:57] I certainly wouldn’t dream of saying that the iPhone model and the complete vertical integration that Jobs is delivering here is not successful. It’s a closed garden and it seems to be one that people like. And obviously that’s going to be an incredibly important part of mobile construction going forward, and mobile is exactly where the world is going.

Gillmor: [22:22] Alright, so why do you think that Sun is shut out of these kind of approaches?

Governor: [22:29] Everybody is shut out of Apple. Everybody is shut out of Apple. Come on.

Farber: [22:36] Salesforce isn’t.

Governor: [22:37] Salesforce isn’t?

Farber: [22:39] EA isn’t.

Governor: [22:41] Sorry, BA isn’t?

Farber: [22:43] EA.

Gillmor: [22:44] Electronic Arts. They showed a bunch of apps. We’re going to see what the apps are in a couple of days.

Governor: [22:51] I mean from an infrastructure standpoint. Of course from the application side that is a slightly different deal, but Sun isn’t an application company.

Gillmor: [22:58] But they have Neil Young on stage. They’re selling the idea that they’re hip in the social media space and they’re getting locked out of the most viral platform on the planet. At some point, are they a white box company or what?

Farber: [23:13] What is the most viral platform on the planet?

Gillmor: [23:16] The iPhone is.

Farber: [23:20] And Sun is getting locked out of that, you’re saying?

Gillmor: [23:21] Yeah. A year ago Jonathan was talking about how…

Governor: [23:30] I don’t think they’re the only one. OK, the Salesforce example is a good one. Certainly I see a lot of other enterprise software companies that are targeting that. But I see, from an infrastructure perspective anyway, which is my view of the world — it is a little bit different — there actually is a fair amount of shut-out.

[23:54] I’m amazingly impressed by Apple that it has been able to create an experience that is so slick and so beautiful that people who ordinarily would choose openness do it. You can’t argue with the success of that business model. It’s fucking incredible. That’s exactly right.

[24:15] This is what I’m saying, basically. If the only way to make money in future in the world is through Apple and iPhone, then yes, Sun is in the crap.

Gillmor: [24:23] No, that’s not what I’m saying. What I’m saying is that they’re changing the discussion from being about their crappy last quarter to being about what I consider to be a social media cozying up to the influencers and the space. They have graphics on their keynotes that Hugh McLeod did. They had Neil Young. They are selling a vision which they are being locked out of by considerably powerful viral players in the industry. To me, there’s a disconnect there.

Governor: [25:05] I would agree with that, but let’s understand this. The PS3 thing, I think that’s a pretty successful platform.

Gillmor: [25:14] Absolutely, and I think Neil Young made that point.

Governor: [25:19] Well, there you go. The fact is that I think he called them. Anybody wants some niceness. Any company on the fucking planet that has a chance to have Neil Young come to that conference, if he wants to do it…

Gillmor: [25:33] It was fantastic. Eric Clapton played at the SAP conference. But the question is…

Gardner: [25:38] Who gives a shit who plays and where? That’s just PR crap, and I don’t think it has a lot to do with it.

Gillmor: [25:45] I think it has a lot to do, the PR crap of selling into the blogosphere with an inauthentic message. I mean, don’t get me started on that.

Governor: [25:56] I’ve got to admit, from my perspective would I have preferred that I was invited to meet Neil Young in the blogosphere? Of course I would. Let’s be honest about this. I would have loved to have an invitation myself.

[26:08] So, if you’re talking about the gaming and the PR aspect, hey, I’m all about that. Go ahead, say it. I’m not going to disagree with that. But it was nice to see him there.

Gillmor: [26:19] It was fantastic. I’m not complaining about not being invited. I’m complaining about the fact that this bait-and-switch, and it continues to be. I don’t know how long they can survive on the vision of a future that every other company that’s going to make money in that space is not them.

Governor: [26:42] No. The thing that amazes me is, in a way that, I mean, I remember years ago, it was like, is Logistics going to buy them? Who is going to buy them? Because at the end of the day, there are some significant assets there.

Arrington: [26:54] I just wonder how successful the Java strategy is going to be when Microsoft is spending huge amounts of resources trying to kill Adobe, and trying to just scratch a few percents away from Adobe’s Flash. Are developers going to even consider Java in that Silverlight vs. Flash war?

Governor: [27:17] Yeah, I think, again, these are slightly different things. So Java is not the same as JavaFX. I mean, JavaFX is a scripting language, and no, I don’t think it’s necessarily going to have the kind of momentum that we’re seeing from…

Gillmor: [27:29] But they spent two-thirds of the time of the keynote on JavaFX.

Farber: [27:33] Look, Sun has one thing they have to do, they have to attract developers. That’s where it really gets difficult, because if they can’t attract developers to JavaFX and people are doing it in Silverlight or Adobe or whatever else, that’s a problem for them.

[27:48] But think about Sun… I have to leave, so I’m going to put in one more coin here. If you think about Sun during the first phase of the Web, they were a huge winner because they were one of the few who were [...] web servers, right?

[28:05] So, in the second phase of the Web, they kind of dropped the ball a little bit, and now what they are trying to do is get into the third phase of the Web by saying: “We’re going to have a complete open source, highly scaleable, high performance, reliable stack of software and hardware, and try to be the infrastructure service for the planet.

Governor: [28:28] And it is one thing. I mean, you talk about the blogosphere a few times there, Steve, I mean, I use WordPress. I don’t know if anyone else uses WordPress, but it seems to me there’s actually quite a few instances of that around the place. WordPress generally runs on MySQL. Now at the moment, do they have a revenue model to support that? Not necessarily.

[28:43] But what about this: what about if people wanted to back-up their blogs? And what if, when you just save your WordPress platform it automatically backed-up to the Sun cloud? That is one area where actually they’re quite well penetrated in the blogosphere. MySQL I think is actually a very interesting acquisition. To me, I’m more interested in that, probably, than JavaFX, certainly than JavaFX, but this wasn’t MySQL 1, this was Java 1.

Gillmor: [29:09] Right. Java one has been used as a catch-all for a number of different marketing [...] the most visible Sun conference of the year, and it has always been gamed for whatever Sun is trying to get across from a trend position or whatever it is that they’re trying to sell, for how they’re going to remake themselves after the bubble crash.

[29:38] And they’ve done a good job of cutting down the number of people that are at the company, of shifting to the open source environment; they’ve done a lot of great things. But at the end of the day, when they start to — you know, it’s kind of like what happened last night with Hillary. You know, at the end of the day, when they throw everything but the kitchen sink at Obama, and he still wins with double digits in North Carolina, at some point you’ve got to say: “Hey, maybe this isn’t just going to work out.”

Governor: [30:12] Can’t close the deal, huh?

Gillmor: [30:15] Well, I was going to write that, but I suddenly got the feeling a couple of days ago that Obama was probably not going to lose, that was going to actually close the deal, so it’s a cheap shot at Jonathan, and honestly I think Jonathan is a brilliant person who is not well served by the current direction of their PR people. I mean, that’s just bluntly how I feel about it.

[30:42] And he has been so far ahead of understanding how these synergies between the consumer space and the enterprise space are going to start to manifest themselves, that I think he has gotten locked into some of the hard blocking and tackling that he had to do to keep the company going, and so he hasn’t been quite the visionary in recent years in terms of how he’s talking about what Sun is doing. And I think it’s a real corporate problem for them.

Governor: [31:12] Well, also it goes back to when Lou Gerstner took over at IBM, you know, and his turn-around. The first thing he said was: “The last thing IBM needs is another vision.” I mean, it’s execution problems.

[31:24] Now, they have refreshed the entire product line; it used to look tired, it doesn’t now. But if they don’t get their sales together, if they don’t start to sell and execute on that, then yeah, you’re absolutely right. Mr. Gillmor, you’re a fine one for calling people dead; they have to start selling more effectively than they currently are. They have some pretty hot products.

[31:46] Again, you talk about the kind of people that want to build interesting services, whether it’s sort of to Amazon or not. Those Sun Fire storage boxes that they’ve built are really amazing things. And storage of media content is a big deal; I think we all agree about that.

[32:01] And so, they’ve refreshed the product line, now they just really need to start showing that they can sell the damn thing.

Gillmor: [32:10] I think they’re in the fight for their life with IBM and HP. If HP does a deal with Microsoft that’s similar to the one that Google did with IBM, I don’t know where Sun’s going to be able to play.

Governor: [32:27] Yeah, I just don’t hold much stock by the Google-IBM deal myself.

Gillmor: [32:32] Well, since Dan has left I guess we’ll have to…

Governor: [32:36] Having a few Google widgets in a corporate portal, I actually don’t think it’s that interesting. And the simple fact is Google is going to be competing with IBM and going after Lotus, going after businesses; Google is going to go after IBM too.

[32:52] I think IBM needs to be very careful about the degree to which they’re embraced and extended. Because I use Gmail, it’s a good platform; I would never dream of using Lotus Notes, and they wouldn’t know how to sell it to a three man shop anyway. So I think Google is going to go right after IBM’s core businesses. I don’t see that relationship as one that is going to be sustained for particularly long, actually.

Gillmor: [33:14] What about the deal with Amazon? How do you see that as impacting on Sun long term?

Governor: [33:22] Well, I think you’ve got to have some skin in the game, and if you can’t get your own cloud services out there quickly enough, then you damn better get them on Amazon.

[33:38] There are some interesting technical functions within Solaris for performance management, you get this great little thing called Dtrace, which is very, very slick in terms of enabling profiling and enter some mutation, and improvement of the prolonged [?] application. They’ve got some very nice storage management functions, so you can start to do things like roll-backs and begin to think more about transaction.

Gillmor: [34:02] Doesn’t Dtrace work on Linux as well?

Governor: [34:06] No.

Gillmor: [34:07] Well, through the Solaris emulation, it does.

Governor: [34:11] I don’t know about Solaris emulation. I mean, Dtrace is basically — I know it’s on OFX, but as far as I’m aware, Linux is really taking this alternative approach, they’ve got their own technology they’re trying to build called SystemTap, but at the moment I think the Solaris stuff is a little bit more bullet proof, and in fact quite a lot more.

[34:33] So, I mean, it’s a very mature operating system. I think the thing is, it was just really horrible to use, and they’ve been spending a lot of time making it less so. As I say, it’s pretty amazing to me that I can just hit a USB stick and have a good user experience with the Sun operating system. That’s freaky.

Gillmor: [34:53] All right, so just…

Governor: [34:54] So the Amazon thing, basically, MySQL is a big deal, in that case, I don’t know, is that going to see MySQL on Amazon, is that going to realize a lot of revenue to them? I don’t think so. But I think they have to keep playing that volume game, and MySQL is it.

Gillmor: [35:14] Just before we wrap this one up, what’s your thoughts about… Mike Arrington, are you still on the call? OK. What are your thoughts, James, on what is going on with Yahoo and Microsoft? Do you cover that space at all?

Governor: [35:38] Yeah, sure. I mean, I could see a strategic case for why Microsoft would want to buy them, but I think the price was absurd. For Jerry Yang to run around saying they’re undervalued really seems absurd to me with the economy the way it is right now.

[36:01] We see a flight to quality in advertising dollars in the micro-payments, that’s going to go to Google, it’s not going to go to Yahoo. So I actually think too often with these deals the CEO is not willing to step back from the brink because they’re making decision with their balls instead of the cold, hard analytical thinking.

[36:25] We see a lot of this with media companies. I think pulling out was a very good idea, and it may well be that a little bit down the line they can pick up Yahoo for peanuts. And now the new rumor is they’re actually going to pull the trigger on Facebook. I also think that’s not a great idea.

[36:40] I mean, Facebook, the latest data we’re getting is that developers are abandoning the platform. So let’s get real. I think to buy a company like this on the verge of a central market collapse would have been very, very dumb from Microsoft’s point of view. And if would actually be fun to do a show about the enterprise platform, because they’ve got some very, very aggressive plans there.

Gillmor: [37:05] Who does?

Governor: [37:07] Microsoft. When they’re talking about 20% of their exchange revenues coming through in a hosted model, that’s damned interesting. The amount of disruption.

Gillmor: [37:16] I totally agree, and I think that the whole Mesh initiative is going to be dominant over the next six months and is going to completely change the game.

Governor: [37:27] Well, I’ve been talking about the synchronized web for a while, and that’s what Ray Ozzie is trying to deliver. It’s going to be interesting to watch.

Gillmor: [37:36] Dana Gardner, you on the call?

Gardner: [37:38] Yeah. Hey, Steve, how are you?

Gillmor: [37:40] Good. How much more time do you have, James? Do you just want to go on for a couple of minutes?

Governor: [37:45] Yeah. My only problem is I’m paying roaming here, so this is probably costing me about $500 to be on your show.

Gillmor: [37:53] Ah, then blow it off. This isn’t worth it, trust me.

Governor: [37:56] OK, man. I hope that I had some value to add. At the end of the day, I’ve been to a lot of JavaOnes. The wrap-up to me would be the [...] in side the community, the community seemed pretty excited. I know that the media coverage has been actually a little more positive than it has been the last couple of years.

[38:16] And yeah, at the end of the day, what are we all talking about? Imagine what it felt like for them. They thought they were in good shape, and the week before the most important event of the year, they have a somewhat disappointing set of results.

[38:28] I think considering that, they did a pretty good job of keeping their chins up.

Gillmor: [38:32] Well, as I told you, you’re going to be the guy who is going to be favorable on this call. I personally think that they’re trending toward some serious trouble. I think it’s something that they really have to grapple with, and I think their messaging around the influencer markets, I think is in serious trouble. It’s going to cause a backlash that’s not going to be…

Governor: [39:04] I agree. Why is Sun inviting [...] to events? It makes no sense to me.

Gillmor: [39:09] Yeah. They’re not doing their homework, and as a result, it creates the feeling like if you’re talking the talk but you don’t walk the walk in terms of paying attention to the people that you’re trying to communicate with, that that might be influencing other decisions that you’re making or the freight train’s approaching that you’re not noticing.

[39:37] So they’re not past following right now, which I consider to be — if that’s the position that they’re in, they really cannot afford to execute poorly in the credibility area. And I’m hoping that perhaps they’ll get that message.

Gardner: [39:59] Well, you know, Steve, I’ve been fairly critical of Sun for a couple of years now, and every time they’ve got an opportunity to come up with a new revenue source, it doesn’t seem to pan out, and I think they’re running out of options.

[40:11] We saw SLA infrastructure play with SeeBeyond. That hasn’t shown any particular market penetration. And we saw a big bet with AMD on low-cost hardware, and AMD is showing signs of significant difficulty. So that hasn’t shored them up in the interim. They’ve still not shown good ability to monetize the Java community, and in fact, continues to alienate them in some significant ways.

[40:41] They need to have the interim revenue to allow their longer term strategies around cloud to develop. I think their vision has been very good, so it largely comes down to execution and ability or lack of ability to maintain a good partner relationship at a strategic level.

Gillmor: [41:04] I think that mirrors what some of us have been saying on the call so far. Can you be a little more specific about what you see as the mistakes that they’re making and what they could do to fix them?

Gardner: [41:18] Well, I think it’s been two and a half or three years since they came out with an interesting new grid utility, ongoing subscription service approach. They could have been layering on more services onto that. They could have been brining their developers into that and binding them into a cloud set of services, creating open APIs for at least some kinds of business services.

[41:40] I know they have to be careful not to compete with who they want to be the underpinnings board, the infrastructure board. But I think it was a significant missed opportunity that Amazon ran away with in that space, and that Google is going to continue to capitalize on it, and Microsoft’s going to come in.

[41:59] So the whole idea of Sun having the underlying infrastructure for high compute power, high availability, therefore lower total costs, the green message, has been lost to an extent, because they didn’t capitalize on the market and become a leader and identified with the developer community.

[42:19] So even though they might have the great rock in Niagra architecture, and they’ve got good silicone to software technologies, without bringing that into a revenue opportunity and binding people in in terms of their standard procedures and web development activates, it goes for naught.

[42:42] I think they’re also significantly, at least at JavaOne this year, giving short shrift to their enterprise businesses. They’re making themselves out to be a Web 2.0 company when they haven’t fully delivered on the JavaFX vision. But they’re not talking about it SLA, they’re not talking about the role of Solaris in the whole private cloud capability of containers and dynamic provisioning.

[43:10] And I would think that would still be something a developer conference would be a good venue for.

Gillmor: [43:15] So I want to roll back just a little bit. One of the features that they rolled out in OpenSolaris with Amazon was roll-back. But when you say FX, that they haven’t fully delivered on that, explain what you’re trying to say here.

Gardner: [43:33] Well, I think in the opening keynote they said this was something that was still in the works. They haven’t got all the deliverable dates, I think they’re into late 2008, early 2009. So they’re still developing and delivering what Adobe with AIR Flex and what Microsoft with Silverlight are deeply into.

[43:54] It’s going to be a bit of a race there. They’re trying to bank on the install base of Java, on the device and PC level, where Flash has ubiquity and Microsoft has ubiquity. So that’s an uphill battle. And I’m frankly not sure why Sun would want to be in that battle.

[44:09] On one hand they professor to be an infrastructure company, and now they’re all still trying to be a webbie application development environment. Java on the client has sort of come and gone, in terms of its relevancy to these Web 2.0 development folks, and yet they’re still plowing back into that.

[44:31] So I don’t know. I’m not sure they picked the timing of there battles very well.

Gillmor: [44:35] We’ve already discussed the messaging around JavaOne, moving into basically a scripting language platform for addressing — I mean it’s kind of like the old discussions about Java 2.0 SE. The client…

Gardner: [45:00] And the end. Yeah.

Gillmor: [45:02] The whole idea that Java’s for whirling Frisbees and stuff like that. I mean, this is going to [...] , when that was the discussion about what Java was good for. The animation was essentially what the desktop application was about, and they didn’t have any platform, and they didn’t really have a lot of adoption of the desktop platform, because it was Windows.

Gardner: [45:26] Right.

Gillmor: [45:28] I think that since Jonathan’s been running the company, they’ve moved well past that sort of arcane discussion. He is, I think, to be applauded for moving the company much more directly into the fundamentals of how they can stay in business.

Gardner: [45:55] Yeah, but he can’t have too many quarterly reports like the last one. I mean, they knocked 20% off, at a time when they were still climbing back out from the last stock disappointment. The time is not — they’re going to lose anther 2,400 employees.

[46:12] It’s difficult to see in two or three quarters how they’re going to significantly approve on their revenue situation.

Gillmor: [46:18] So the question then is, why are they going out and selling this vision of Mesh without the Mesh.

Gardner: [46:27] I don’t think they know what else to do.

Gillmor: [46:31] I mean — I’ll just let that one sit there. Scoble, are you still on?

Scoble: [46:40] Steve, I still come back to Amazon, though. I think Sun has a problem here that they don’t have a good cloud system. And if they do come out with one thanks to their MySQL purchase, they’re going to go into Amazon and say, “Hey, we’re competing with you, but we’d still like to sell you hardware for your system”

[47:00] That sounds a little difficult. [laughs]

Gillmor: [47:04] I don’t see how they’re developing their own cloud system. Do you, Dana?

Gardner: [47:11] I didn’t hear that question.

Gillmor: [47:13] Do you see Sun as developing their own cloud strategy.

Gardner: [47:19] They’ve got all the parts. They have the pieces, they have the parts. They have a developer community that they could bring into this. They’ve had to make a strategic decision about whether to compete with the other cloud providers or not. They haven’t made the decision, and therefore it languishes in the field as the field has gone beyond them.

[47:38] But I agree, this is their big opportunity. A public cloud and private cloud synergy where they are the public cloud provider and then they go in and sell the private cloud infrastructure and create a developer community buying between them, and/or software, middle-ware buying through the Java standards and partners.

[47:57] That to me at this point seems to be the only play, but I’m not seeing execution on it.

Gillmor: [48:02] Right. The press conference that we were both at yesterday, I thought Jonathan made that case very well. But the problem is that the messaging that’s going out is about JavaFX. It’s going out about what they call Helium or something, I forgot the name of it.

Gardner: [48:23] Yeah, right. Hadrazone? Or something like that?

Gillmor: [48:25] Yeah. Hydrazine.

Gardner: [48:26] Hydrazine.

Gillmor: [48:27] And the best that I could understand what they’re talking about, is they’re going to take the capabilities of their platform in the area of provisioning and providing those kinds of services and break that out as a service by itself.

Gardner: [48:44] The problem with that now is they’re being easily perceived and accurately perceived as in a “me too” mode. They could have led on some of these initiatives, but it’s going to be “me too.” It’s Mesh me-too, it’s going to be Dynamic Media on the client me-too. It’s going to be cloud compute with an ad-based value of some sort that they alluded to. That’s a me-too.

[49:09] They’re doing me-too, but they’re competing with some very significant players that have a billion dollars a quarter to spend on cap X, and Sun is not profitable now.

Gillmor: [49:18] Right. So, yeah, the thing that I found least compelling about the discussion of what they called, essentially, monitoring or instrumentation. Instrumentation for the purposes of being able to make the sale of that data, behavioral data in other words, attention data, to advertisers and to vendors and so on and so forth.

[49:46] That makes a lot of sense, the only problem is that if they’d been at Mix — what was that, three months ago — they would have seen that one of the most significant things behind what Microsoft is doing, of which Silverlight is only a small part, is instrumentation of exactly that order.

Gardner: [50:08] Yeah. And once again, on one hand Sun says, “Were in the infrastructure business, the picks and shovels to the providers.” On the other hand they come out with a kind of a flood announcement: “We’re going to get into the advertising network business, ” which is a much higher abstraction of value.

[50:23] So which is it?

Gillmor: [50:27] So, Scoble, I’m going to wrap this one up. You got anything else?

Scoble: [50:31] Yeah. I think it’s very telling. I mean, if you just compare Silverlight to the Java experience, look at the two conferences that we just went to in the last couple of months. The Mix Conference and the JavaOne Conference. Look at the range of stuff that Ballmer and Ray Ozzie and Scott Guthrie and that crew showed off, and compare it to what we saw at Neil Young’s stop yesterday.

[50:59] I think Sun’s in trouble. Would I rather have the Olympics or Neil Young? I’ll take the Olympics every day of the week.

Gillmor: [51:09] I’ll take both. I thought Neil Young was brilliant in grasping — what was it, 10 years ago, 20 years ago, he said? He wanted to do what he’s been doing now 20 years ago. And now the technology’s caught up. I think Sun has had a key role in catching up with the harnessing of these incredible technologies.

[51:37] In the last year or so they’ve made, I think, a good effort in starting to grapple with and understand the value of social media interaction and how that might play into their strengths.

[51:52] This conference, I thought they took a number of steps back in terms of not quite having n understanding of how they need to be able to talk with the very people that they’re trying to encourage to join their campaign.

[52:12] And I was quite disappointed by it and especially offended by some of the people in PR and their approach to it.

[52:22] So, this is Steve Gillmor. This has been Gillmor Gang for Wednesday, May whatever the day is. The 6th. And we apologize for the sound, but not for the ideas and the great people who’ve joined the show. We’ll see you again next time.

[52:37] [music]

Gillmor: [52:38] As to News Gang Live, it will follow shortly on this same network. Thanks again. Bye-bye.

[52:46] [music]

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