Sun shines with Java, but competitors eye the prize

By Philipp Gollner

SAN FRANCISCO - Sun Microsystems is betting the Java software platform it developed will raise its fortunes in emerging markets, but it faces tough competition from bigger rivals familiar with Java - as well as questions about the technology's future.

Sun, which changed its Nasdaq ticker symbol to "JAVA" from "SUNW" to emphasise its focus, sees broad use of Java-enabled cell phones leading to increased sales of its computer hardware, the bulk of its revenue.

Sun introduced Java in 1995 as a software technology platform that can sit on everything from cell phones to huge computers, uniting diverse software programmes and hardware platforms.

Now open to development by anyone, it is found in numerous devices from Smart Cards to printers, computers, servers and cell phones. The company says there are about 6 billion Java-enabled devices, including 1.2 billion cellphones, and the number is growing.

"Java is one of the most-viewed brands on earth," Sun Chief Executive Jonathan Schwartz said in a recent interview at the company's campus in Menlo Park, California. "It becomes a vehicle for us to introduce ourselves" to customers. "It's our big bet."

Some analysts doubt the bet will pay off, though, arguing that Sun's historic connection to Java won't automatically translate into computer hardware sales.

"They are living in a story-telling world," said Trip Chowdhry, a software-industry analyst at Global Equities Research. Even though cell phones and other gadgets run Java, that does not mean big computer infrastructure companies will turn to Sun, he added.

"There is no tie-in," Chowdhry said.

Schwartz said the strategy of stoking emerging-market hardware sales through Java is already working, but he declined to provide figures. Software represents about US$1 billion ($1.36 billion) of Sun's roughly US$14 billion in annual revenue, and analysts estimate Java generates about US$100 million from licenses.

Java no longer ships with Microsoft's Windows operating system, reflecting a long-running battle between Sun and the software maker, but it can be made to run on Windows. Now open-source, meaning developers can get access to and improve the key Java software for free, it also faces new competition.

Java remains a key programming language for major technology platforms such as International Business Machines' WebSphere software, but Web application developers are increasingly turning to newer, easier-to-use languages such as Ruby, which works with Ruby on Rails, an open-source rival to Java, Chowdhry said.

Nor is Sun alone in the race to gain from the growing appetite for computers, cell phones, digital gadgets, internet access and technology infrastructure in developing countries. Businesses in emerging markets are also being courted by IBM, Hewlett-Packard and Dell, among others.

Sun is the world's third-largest server vendor, behind IBM and HP, according to researcher IDC's survey of second-quarter server market revenue. Dell is ranked fourth, followed by Fujitsu Siemens Computers BV.

HP, based in Palo Alto, California, said in August its revenue from Brazil, Russia, India and China rose 35 per cent in its fiscal third quarter and now accounts for 8 per cent of HP's total revenue. HP gets 65 per cent of its revenue from outside the United States.

"We've been in many of these countries for more than 20 years," said Marius Haas, senior vice president of HP strategy and corporate development, in a recent interview. "We're growing faster than all our competitors" in emerging markets.

In Brazil, Russia, India and China, the market for information technology is growing at least two to three times the rate of gross domestic product, Haas said.

Schwartz acknowledged that Sun faces tough competition in emerging markets.

"We certainly have our work to do" to win emerging-market customers, he said. "It's not as though I can guarantee myself that we can get business on the back end, but I can guarantee myself that we can get ourselves in the door."

Schwartz said Sun is in a good position to grow in emerging markets partly because it has long-standing relationships with telecommunications companies, which account for more than 20 per cent of its revenue and are expanding in developing markets, and because it has built its business around the internet.

The focus on emerging economies is a good bet, say analysts who see those parts of the world as growth hubs.

"Sun is making sure they are at the right place at the right time with the right resources to take advantage of the opportunities when they arrive," said IDC researcher Jean Bozman. "That's not to say that competitors will not also be there."

- REUTERS

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