In search Of Sun's Java economics

In search Of Sun's Java economics

Summary: "Freedom is scary; but on balance I think Java’s new path will be more interesting and more profitable and more fun." --Tim Bray Sun's Director of Web on his Java Is Free blog.

TOPICS: Open Source

"Freedom is scary; but on balance I think Java’s new path will be more interesting and more profitable and more fun." --Tim Bray Sun's Director of Web on his Java Is Free blog.

The big question is how much more profitable will free Java be? Perhaps a GPL'ed Java will have a huge impact, but good luck putting a number on that impact. Sun has never broken out profits from Java and any change to that wouldn't come until July 2007 when Sun's new fiscal year begins, says Brent Bracelin, an analyst at Pacific Crest Securities. "It's tough to make assumptions and break out one component such as software," says Bracelin. Bottom line: There's no baseline for comparison.Sun's filings with the Securities and Exchange Commission also don't yield a lot of clues about how much money the company was yielding from Java. The conventional wisdom is that Sun has failed to monetize Java--a contention that Sun CEO Jonathan Schwartz danced around in a May Q&A with Forbes. Sun's annual report notes the company is selling "solutions" with four components: systems, storage, software and services.

"Open Source Initiatives such as OpenSolaris, OpenSPARC, Open Source Availability of Netbeans, Java Development Tools, Java Middleware and Java Platform Technologies are aimed to significantly increase participation in processor architecture development, software and application design by making cutting-edge hardware and software intellectual property freely available. This helps lower barriers to the next big build-out of the Internet, encourage innovation and foster bringing new products to market," says Sun in its annual report.

The rub: Sun's financials don't give much of a hint of how software revenue looks. Any revenue derived from software is lumped into a category dubbed "products" says Bracelin. That category includes sub categories called computer systems and data management products. Computer systems revenue for the year ending June 30 was up 2.9 percent from a year ago to $5.99 billion with most of the growth coming from data management. Total revenue for the year was $13 billion. In other words: Your guess to Java revenue is as good as mine.

Whatever internal figures Sun is looking at it's clear that the profits of keeping Java in its fold aren't looking nearly as good as what Sun can get from selling additional services. And more developers on board playing with Java may mean Sun can sell more servers and storage gear. For Sun's positioning as a go-to infrastructure provider maybe open sourcing Java makes sense if it can poach Red Hat's model with Linux, which is currently under siege. The proof will appear in about four quarters in Sun's financials--assuming that software is eventually broken out.

Topic: Open Source

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  • Why should Sun sell more hardware...

    ... as a result of software changes which have the effect of allowing other companies to make their products run better with non-Sun hardware?

    Remember the justification for making Solaris open source? Ten years from now, if more places use Solaris, there will be more applications for Solaris.

    Sun might sell hardware to some of those places.
    Presumably because they're sentimental because Sun gave away some of the software they're using.

    And selling services?

    Sun has not broadened its range of services offered, I think even eliminated a service providing unit as a non-core business.

    Awhile ago, Sun was selling services of utility computing capacity. That may have been the services plan. It's in for retooling after a lack of response.

    And Sun's main market is companies large enough to do their own service providing to a large extent. Why should Sun expect more clients or higher service payments?

    But one thing it does accomplish: Sun now has more (unpaid) help on Java. If this makes staff supernumerary, Sun can gladden Wall Street's (non-existent) heart by cutting down on overhead.

    Anton Philidor