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For consumer product manufacturers, retail distribution is key - it's how you get in front of a customer. It's why the big PC manufacturers are all working hard to score deals with big retailers (or build their own retail outlets) around the world.

But making money on PC's is tough - for most PC makers, you're remarketing someone else's operating system and someone else's microprocessor - it's not for the faint of heart (or faint of balance sheet). For Sun, our retail distribution concerns don't surround consumer hardware (we don't make PC's) as much as consumer software - the popularity of which defines our market opportunity. Said simply, if you're running Java or another open source platform, Sun can build differentiated datacenters in the clouds behind those devices. If not, it's a lot tougher (not impossible, just a lot tougher).

Consumer software, though, is defined by a virtuous cycle. Developers target popular software (like Firefox, Flash or Java). In so doing, they create applications and content that consumers use. What consumers use, they tend to use in volume (the internet's a very big place, after all). Developers notice those volumes, and target the platforms that reach the most consumers. And that defines Sun's market opportunity (someone smart once jumped up and down on stage yelling "Developers! Developers! Developers!" Amen.)

The Java runtime remains one of the world's most popular platforms used by developers - and thus, one of the world's most popular consumer software products. For the cynics about to chime in with "but I don't use it," the odds are good you do - it's become an invisible, but critical part of an enormous breadth of consumer and business services (from video uploaders on social networks, to stock market analytical tools). And as that content becomes more popular, so does the Java platform - expanding Sun's market opportunity in the corresponding datacenters. That's why we see it as a virtuous cycle.

That cycle also provides Sun with some exceptional foot traffic - just last month, we distributed more than 60,000,000 Java runtimes, to users all across the planet. The number is growing, as more content is built for Java 6 and the upcoming JavaFX, as more PC's join the network, and as more workers join the workforce (and are assigned Java-enabled laptops). At this point, I'd bet there are about 1,000,000,000 (that's a billion) Java runtimes installed on PC's around the world. With more by the day - each generating revenue for Sun.

As with most of our software products, we don't distribute products without intent - like Google, our products are both a means of acquiring customers, and generating revenue. Freely distributed software establishes a relationship with an end user - just like free search, free news or free shopping. About two years ago, we reached an agreement with Google in which they recognized the value of our relationships with Java consumers. Just as the PC makers want distribution via retail outlets, Google wanted distribution of their search technologies - via our Java update mechanism. When we present an update to a user, we may offer other sponsored software (a Google search toolbar, eg).

After a careful negotiation, we agreed, and crafted a wonderful relationship that served consumers, Google, and Sun. Last year, we renewed the agreement, and recognized even more value for all involved. This year, we decided to run an open auction, and received bids from a number of companies. It was a tough process, but given the growing volume and momentum around Java, we clearly represented just about the most popular distribution vehicle on the internet today - and Microsoft worked hard to represent the most attractive total offer.

The decision to go with Microsoft was based on overall value - it was also predicated upon their endorsement of and agreement to help promote MySQL. Stay tuned for more details on what we'll be doing together.

What's the deal worth to Sun? This deal will be one of the most valuable distribution deals ever struck in the industry - and it likely makes Microsoft one of Sun's largest customers. It'll also set the stage for an even more interesting auction next year, as more and more folks realize the value of retail distribution. Thus far, our deal with Microsoft is US only - and new auctions are in flight for international rights (alongside other non-toolbar products for the US, perhaps a browser...).

As for other high value distribution assets at Sun? I just read one analyst report questioning whether anyone actually used OpenOffice. We happen to run Sun Microsystems on OpenOffice - more importantly, it's used across the world, and we're now commercially licensing it to brand name companies wanting to save big dollars on office productivity.

To put some data around its popularity, last week, we distributed more than 3,000,000 copies of OpenOffice 3. Downloads are accelerating, giving us a reachable user base we estimate to be between 150,000,000 and 200,000,000 users - a global recession will amplify OpenOffice adoption. And 100's of millions of users drive a lot of foot traffic. An auction's afoot (no pun intended) to see who we'll be partnering with us to integrate their businesses and brands into our binary product distribution - the possibilities are limitless: people tend to print those documents, fax them, copy them, project them (and I know this annoys my friends in the free software community, but branding allows us to invest more in OO.o community and features, from which everyone benefits)).

With Verizon running a similar auction to integrate a search vendor into their wireless devices, they (and their industry across the world) are seeing the same opportunity. Just because a few retailers are having trouble doesn't mean the value of reaching customers has gone away. Foot traffic still counts, but in today's economy, software distribution's a lot easier to manage and monetize than a real estate portfolio.

After all, who wouldn't want to meet a few hundred million new customers?

Interesting internships found here

SEBI
Planning Commission

The bursting of the internet bubble was good for the computer industry.

Many of us didn't like the medicine, but I can't remember a single customer upset at the idea of paying $20,000 for computing infrastructure that used to cost them $100,000. The price compression came from open source software, and a move toward general purpose servers, and resulted in companies formerly making 65% gross profit on products (Sun among them) facing a new reality.

But what doesn't kill you makes you stronger.

Since then, Sun's built the biggest open source software business around (see this report for details), from platform software to application infrastructure (even a consumer product or two). Like Google and Microsoft, our products are both our ads and our revenue streams - our brands, and products, are recognized globally.

And that brings me to today. I was on a call last week with the Global CIO for one of our largest customers - one who was dramatically affected by the credit crisis. I was outlining where we were headed in open storage (a business that grew more than 150% for Sun last quarter), and he said, "One of your peers just told me flash was overhyped." I asked him if the peer happened to work for a proprietary storage company. He protected his source, but I knew the answer (I probably knew the CEO, too).

The storage industry bears a remarkable resemblance to the proprietary server industry at the bursting of the internet bubble - closed, highly profitable, frustrating customers with exorbitant charges. Plump, and ripe for change. Like a plum. Flash memory and open source file systems are about to change the landscape, and upend the industry - you read it here, first.

A notable philosopher once said, "You have to stop to change direction" - and for better or worse, I know a lot of customers stopping right now. They're rethinking their future, and it's into that thought process we're introducing our newest open storage platforms, engineered with flash memory and open software to radically scale back what customers have to spend - while radically increasing performance, capability and ease of use.

Amplifying our Thumper product line, what started as the FISHWorks Project (Fully Integrated Software and Hardware) in Sun's Labs, is now being unveiled - in the Sun Storage 7000 line of unified storage products.

Now, storing data on a disk is fairly straightforward. But administering large pools of fully replicated data, diagnosing problems on production systems, seamlessly dealing with capacity planning and disk failures, spanning every protocol known to man - all without draining your budget with antediluvian license keys and proprietary hardware - those are very high value problems to solve.

And those are exactly the problems we've solved.

The 7000 class systems take about five minutes to set up and provision (yes, five), and we've eliminated almost all the complexity around volume administration and drive failure (remember, ZFS technology is at the core). The 7000 systems are driven by the most scalable, powerful, open storage microcode in the industry: the OpenSolaris kernel. DTrace analytics provide a real-time lens into production systems - to understand performance, workloads, and help make live capacity-planning decisions (click picture at left for a sample control panel). The systems come bundled with a full suite of protocol, data management and availability features - built into the system without incremental fees or license keys.

Storage customers and administrators are about to experience a radical improvement to their quality of life - all without pharmaceutical intervention. And as the price of flash memory continues to plummet, it's only going to get better.

But you have to stop to change direction.

____________________________________________________

Try out a 7000 free of charge - just go to our Try and Buy page, select a configuration, and give one a whirl.

And as we did to kick start awareness of our Niagara systems, for those capable or interested, write a blog or publish a review (use the tag "fishworks") - we'll select (at our sole discretion) from those we see, and give a few 7000's away to those with the most valuable/constructive comments. All reviews are eligible (good and bad).

A little bit of history here, too.

If you are into software and happen to be close to Bangalore or are willing to travel a bit then this event is highly recommended for the immense amount of learning that can be compressed into just 4 days.

From http://foss.in/faq
<Quote>
Q: Am I qualified to attend FOSS.IN?
A: FOSS.IN is for anyone who is interested in FOSS. However, understand that the focus is contribution to, not use of, FOSS. So if your objective is to contribute (in terms of writing code or documentation, testing, developing artwork, etc.) then FOSS.IN is for you. FOSS.IN has no policy that excludes anyone from attending the event - there is no “qualification” other than your interest in FOSS.
</Quote>

From http://foss.in/about
<Quote>
FOSS.IN is a non-commercial event organised and run entirely by FOSS community volunteers. It does not represent the interests of any commercial entity.
</Quote>

I would also like to extend my congratulations to his web team for having chosen MySQL as the platform behind their election web site, BarackObama.com.

Lest many of you get your hopes up, we cannot guarantee the White House to all MySQL users.

FOSS Workshop at Seth Jai Parkash Mukand Lal Institute of Engineering and Technology (JMIT)
7th (Fri) & 8th (Sat) Nov 2008
A FOSS introductory workshop is being organized to be held at JMIT, Raudaur, for Lecturers/Professors of computer / electronic streams at JMIT and neighboring colleges. Proposed strength is 40 participants, which will also include some student members.

We also greatly increased the transparency of Sun's business by providing line item detail surrounding our most important product categories (and we broke out core elements of our Software business for the first time). If you'd like to listen to our earnings call, just click here - in addition, here's a quick synopsis of the quarter and our business overall.

At a corporate level in Q1, Sun's revenue was down 7% year over year. Growth in our emerging products was more than offset by declines in our traditional, high end products. We were surprised by the magnitude of the decline, which reflected a dramatic slowing in the US and Europe, and the effects the credit crisis is having on our customers - across nearly all geographies and industries, but clearly concentrated among financial services companies.

Unlike our peers, Sun is more exposed to high end systems - so declines in this business have an immediate impact, even if our newer, emerging businesses demonstrate fantastic growth (which many did). For example, the Tape market won't sustain 30% year over year growth for any participant - but our ZFS based OpenStorage products are growing at more than 100%. The latter are smaller, emerging businesses, driven by open source and new innovations - and will take time to eclipse more traditional businesses in our P&L.

To drive an even greater level of transparency for investors and analysts, we've added a new management report to our quarterly updates - for the first time, this will give line item detail of our performance, and a sense for how we're making some of the most important decisions at the core of our long term strategy. You can find that break out, here.

Here are a few of the major questions I'm receiving:

What went well within the quarter?

The biggest highlights were the performance of our Solaris based, chip multi-threading (CMT) systems, which again grew a whopping 80%, year over year. These systems leverage awareness of Solaris/Opensolaris and our outstanding ISV portfolio, and are driven by extreme energy efficiency and virtualization - attributes we just multiplied with the launch of our newest CMT system: the T5440.

Simultaneously, our Open Storage systems also delivered a great quarter, up 150+% year over year. These systems, known by many as Thumpers, are amplified by the awareness of our open source ZFS file system, a technology at the heart of Sun's storage business. You'll be hearing more about Open Storage at a launch event we're holding on November 10th. If you're technical, and you want some hints about what we're about to unveil, click here.

And finally, most of our software business grew - including MySQL, Java, alongside Solaris, management and our virtualization products. As we've been saying, open source is a great distribution model - and it feeds a great revenue model.

What about lowlights?

Clearly the traditional businesses slowed significantly - with enterprise systems (our largest, mainframe class systems) declining year over year. This time last year, those same systems grew nearly 20% - so the downturn is having an impact. It's crucial to understand these systems are far less sensitive to open source innovations or Solaris adoption - they're sold to customers who are scaling up existing Solaris applications, who rely on quality, fault tolerance and our capacity to deliver mainframe scale. We and Fujitsu just expanded this product line - and no matter the downturn, we remain exceptionally focused and committed to traditional enterprise computing. The expansion of scale out computing doesn't negate scale up computing - if anything, it leads to even greater demand, over time. IBM was right, mainframes will always be sexy (especially when they run Solaris :).

On the storage front, tape declined slightly, although our high end storage systems grew, yielding growth overall in storage - growth we're driving to accelerate with the introduction of our upcoming Open Storage innovations.

Why were gross margins lower this quarter?

A few reasons that Mike Lehman, our CFO, elaborated on during the call - the lull in very high end systems, along with discounting and component pricing depressed gross margins. In addition, we went through a series of product transition related expenses this quarter we do not expect to recur, that depressed margins by around 2 percentage points.

Now, how is Software growing if you give everything away?

We make our software freely available to enable its distribution to the farthest reaches of the market - which we then monetize with commercial subscriptions and services, alongside optimized hardware systems (like Open Storage, above). We continue to reach customers that have already settled on our software - the process of selling to them is simplified by the fact they're already using our core products. And unlike most university students (who typically have more time than money), our paying customers view downtime or administrative complexity as more expensive than a software subscription (that is, they have more money than time).

Thus, customers will pay, and continue to pay for access to enterprise grade features, along with mission critical support and maintenance - the Software business is both a license, subscription and services business.

To understand the total size and value of Software at Sun, you need to look at billings alongside our multi billion dollar support streams - remembering that a lot of our software is sold as a subscription service (remember, it's open source). In addition, you have to recognize that how much a "Systems Service" support contract is attributable to software is entirely subjective (we don't price them separately to customers). It's like asking how much revenue a mobile phone manufacturer should attribute to their operating system - you're not charged separately at the point of sale.

Wait, you make money off Java?

Yes, it's among the most profitable technology products at Sun - and improving. Java's one of the most popularly distributed pieces of Software on the internet, we distribute over a million Java runtimes a day to users across every OS and geography on PC's. That helps us reach a very broad community of users and, more importantly, developers. We have some exciting news coming up around these distribution volumes - and their value to us, and others.

What is Sun focusing on?

Strategically, we continue to focus on two core areas - creating the world's largest, and fastest growing developer communities - for whom we build the products, services and technologies on which they'll build their products and services. With brands like MySQL, Java and OpenSolaris - we measure and drive their adoption very aggressively.

And secondly, we deliver compelling commercial offers to those deploying applications - across a diversity of industries - through commercial subscription, services and optimized system products. That is, we sell datacenter systems, software and services.

We're focused on today's customers with our current products and services, and tomorrow's customers with our investments in freely distributed software.

Operationally, we're focused on execution - in the field, in the labs, and on behalf of our shareholders. Innovation loves a crisis, even when the stock markets don't - and Sun's positioned very well to supply the platforms on which the next generation of clouds will be built.

What are you hearing from customers?

It really depends upon industry and geography. From Wall St. I've heard, "I can't take your call until I crawl out from under my desk," (only a slight exaggeration) - at the other extreme, an executive at a professional social networking company said, "we're being crushed with new accounts."

But there are three basic themes I'm hearing.

The first is a profound concern surrounding the global economy. If the headlines are bad, you hold off consumer spending - if you hold off on consumer spending, the headlines are likely to worsen. It's tough to break that cycle.

The second is a reaffirmation of the importance of technology - for discovering drugs, running businesses, modeling supply chains and automating business processes, technology's not getting less important, it's getting more important. Even if budgets are tight in the near term.

The third is the need for change - one executive to whom I spoke recently said her entire discretionary budget was consumed by one proprietary vendor's price increase. So she's out looking for an alternative, and MySQL fits the bill. Which is to say, necessity's the mother of invention - and there's a lot of necessity going around right now.

_____________________

All in all, it was a tough quarter for Sun and our customers - but we're emboldened by the progress we made in our emerging markets and technology areas, investments we plan on amplifying and accelerating. Investments whose adoption will be hastened by customers facing new choices.

Stay tuned for our newest storage announcements on November 10th... just as the popping of the internet bubble let loose a flood of innovation for the server world, the global credit crisis is about to shake up the storage industry, too.

Recently in an indian state the fundamental rights of law abiding citizens of India have been sacrificed to competitive regional politics. Full marks for guessing which state I am talking about. The rule of law has been a casualty and extra-constitutional power centers have been allowed to have their writ enforced illegally in cosmopolitan city. The state government has failed in its discharging its constitutional obligations and should have been dismissed by now.
The national parties of India are equally to blame for supporting and having tie-ups with regionalist formations with separatist demands. In this particular case the party in power in center and the state has abdicated its constitutional responsibilities of protecting fundamental rights to life and liberty of indian citizens with impunity while main opposition party is a silent spectator.
Competitive regionalism for sake of vote banks is at play and only a punishment meted out by educated classes by voting as one block at the hustings would cure them of this malaise.
With delimitation of constituencies tilting scales in favor of urban indians who are less caste, region, religion and language conscious than their rural brethren the task of awakening the new set of voters to the perils of destructive politics lies with us bloggers. It doesn't do bloggers any credit if we play into hands of divisive politicians and divide ourselves into hindi speaking north indians or marathi speaking manoos or kannadiga sons of soil. We need to fight back. Its not the street fights that determines the victors in today's world its the battle for mindshare, what are 7000 street fighters against 2 crore minds of mumbaikars. They have cast the first(second and nth) stone and we have been silent. We need to push back the fringe elements to where they belong into the dustbin of history, un-heard and forgotten.

India cannot and should not remain a predominantly rural country. 600-900 more million people need to move into the cities to make India an urban nation un-tarnished by violence due to differences of sex, sexual orientation, caste, religion, language, culture or thought. If this is how our cities are to become ghettos run by self proclaimed Godfather(s) backed by violent and malevolent crowds then we might as well resign ourselves to the regressive individualism hating medieval society that pervades so many of our villages and forever be resigned to brain drain of our best and brightest minds to the relatively free societies of the west.

It has always tripped me a bit. The Americans like to call socialists and other left leaning people as liberals. In India the move towards a market oriented economy was termed liberalization. So a liberal in India is actually a supporter of economic liberalization. In India we have seen the license quota raj in the name of the planning that has wrought havoc in the first 50 years after Indian independence. So are you an American style liberal or an Indian style liberal.

A quick search on the web confirmed my belief on what an Indian liberal actually stands for. From liberalsindia.com
<Quote>
The Liberal position on the economy is very clear. The business of the State is not business but government. In a liberal State, the individual is supreme and the State must work to further his or her potential. Therefore, the State will focus its activities on maintaining law and order, defence, physical and social infrastructure, health, education and a social safety net.
</Quote>

I thought I'd share a note I sent earlier in the week to Sun's leaders - about the turmoil we're seeing in the markets, and how I want our team focusing their efforts.

_______________________________________________________________________________

Begin forwarded message:
From: Jonathan Schwartz
Date: September 30, 2008 12:02:29 AM PDT
To: allsun@sun.com
Subject: Headlines, Financial Crisis, etc.

You can't have missed today's headlines - the American Congress failed to pass a critical bill authorizing the Treasury to put a floor under the US banking sector. The market swooned, and politicians in the US, and across the world, are bickering over the right long term answer - jump in and take action to save the troubled institutions, or step aside and let the market sort it out. Several more banks/insurers were shuttered or bailed out today - I'm confident we haven't seen the last of these collapses and rescues.

And I know there are questions about "how does this affect Sun?" Well, I believe almost all our core customers will be affected - not just the banks, but the telcos, hospitals, media companies, construction firms, airlines, governments, startups, you name it. Every customer that depends upon credit as a means of financing their business - whether it's a university or a Fortune 100 transportation company - is going to be under severe stress.

It's also going to create a huge opportunity - if we're on offense. Not on defense, not worried about the impact on Sun, but driving the outcomes for Sun's customers and shareholders.

And here are a few important things to remember.

1. Our customers look to technology as a means of driving value and productivity.

You're not going to hear from any of our customers, "let's stop buying technology and hire more people to do the work." They're going to default to the opposite - automating work, and finding answers and opportunities with technology, not headcount. And in that process lies an opportunity for Sun - to engage with customers in driving down cost, driving up utilization, and driving the changes that yield immediate and long term benefit. The right question for every customer you meet is - "how can I help?" I assure you, they'll have ideas for us. And we have no shortage of ideas for them. Personally, I'm reaching out to customers and partners just to check in and offer help - I'd recommend you do the same.

2. That said, we are aggressively expanding our customer base.

Our concentration in financial services and telecommunications is exactly why we're working so hard to expand our customer base. We're dramatically underpenetrated in the global market - and that represents a great opportunity. I need every executive to think seriously, esp. in the market-facing portions of the organization, about growing our current relationships and growing new customers. The 'and' is important - growth matters in both contexts.

And why do I think we have permission to grow new customers?

3. Because innovation loves a crisis.

Remember the bursting of the internet bubble? The initial wave of open source adoption followed that collapse some six or seven years ago. That same zeal for breakthrough, game changing economics is back with a vengeance - and this time, Sun's positioned as the single biggest potential beneficiary. Want proof? As companies move to lower the cost of proprietary database vendors, their number one choice is: MySQL. The number one choice to lower spending on proprietary storage: ZFS with OpenStorage. How will the proprietary alternatives fare against xVM? Glassfish? Lustre? OpenSolaris? Same, from where I sit. There's opportunity everywhere I look.

We can, and should, be on offense across the board. From our newest Batoka and M-Series SPARC systems, to our newest Constellation Intel and AMD blades, from our network identity offerings (talk about automating labor-intensive processes!) to leveraging our amazing SunRay thin clients, or our PS and Support Services capabilities - we have the most powerful offers we've had in years. Imagine if our portfolio had been this strong when the dot com bubble burst - we'd have swept the floor, and been in a dramatically different spot.

Which is all to say, there will be no end of opinions surrounding what the US, or the EU, or the Asian governments should be doing to bolster economic performance. I'm not that interested in the public debate - I am infinitely more interested in the private debate - going on inside every one of our customers surrounding "which OS will we pick?" "What's my open source strategy?" "How can I radically reduce spending on proprietary storage?" "How can I save on power and space?" Which vendor understands my problems?" "Which vendors are asking if they can help - which are truly my partners?"

And yes, we will see some customers disappear - we will also see many emerge even stronger. And the market, as it's done for the past 30 years, will return to growth - led by the companies that took advantage of the downturn to become even more valuable, to grow even faster.

So I want to assure you, we are watching the market very carefully, to understand the impact on Sun, and the challenges in front of us - on a macro and micro level. But I and my leadership team know the drill, we've seen this before when the last bubble burst - *now is the time* to get in front of the opportunity, and firmly establish new ground. Now's the time our customers will be most open to change.

Let's be sure we're there to help - and to take advantage of the opportunity.

Jonathan