Comdex '99: McNealy - A future without Microsoft

Services, not software, will be the way of the future, said McNealy, who called for a breakup of Sun archrival if it fails to comply with remedies to restrain its monopoly

What would a Scott McNealy Comdex keynote speech be without tossing a few projectiles in the direction of Microsoft?

And Sun Microsystems' CEO did not disappoint Wednesday morning as he landed several jabs at his arch-rival, whom he described as out of date with changing times.

"(In the future) the computing industry is going to look much more like the telephone industry -- with centralised hardware and services for a fee," said McNealy, pointing out that such a future would not need a Microsoft. "The last 20 years have been all about the about the OS industry -- or more like the OS company," he continued. "But I have to ask: What's the OS in your cell phone? You probably don't know and you shouldn't."

"When you buy applications, five of the top 10 are used to fix the damage you did with the first five," he said. "Are you ready to spend five to eight hundred dollars for Windows 2000 (and Office 2000) -- and help debug it?"

Instead of dealing with increasingly complex PCs, consumers should instead only have to deal with a simple set of services. Do you want word processing? Just order the service, said McNealy. It should be so simple that a show such as Comdex "should not exist", he added.

Sun has already announced that its answer to Microsoft's Office Suite -- called StarOffice -- will be turned into a service over the Web early next year. The service will be offered through Internet service providers with a unique pricing model: If the ISP charges for the service, then Sun will charge the provider, otherwise the service will be free.

Already the company has been giving the software away for free to drum up interest. The ploy has been seemingly successful with more than one million people downloading the software in the past two months. That popularity has spurred Microsoft to offer its own Office applications for rent on the Web sometime next year as well.

Meanwhile, McNealy called for a breakup of Microsoft if the company can't comply with the remedies that Sun recommends be imposed on the company. In a question-and-answer session following his keynote, McNealy said Microsoft should be required to end preclusive agreements; open its APIs (application programming interfaces); adopt transparent pricing so it "can't hurt IBM because IBM makes mainframes and Dell does not"; and stop using its "monopoly money to leverage its monopoly in other areas".

"Do you know any other company that operates at 51 percent pretax margins, other than the IRS?" McNealy asked. "All Microsoft should be allowed to do with its monopoly money is give it back to the shareholders. Or they could put it into research and development so they could truly innovate and not confuse R&D with M&A (mergers & acquisitions). They are incorrigible."

McNealy hit on the "Microsoft as monopoly" theme throughout his keynote. His opening act was a pair of magicians who transformed a box of Windows into a Monopoly game.

After the Las Vegas set collapsed following a rendition of "Breaking Up is Hard to Do," he offered a list of the "Top 10 Signs Microsoft has Bought 20 Percent of Las Vegas." Selections included "the pirates in Treasure Island really steal your money" and "the showgirls strip down to their Visual Basics".

In the Q & A, McNealy was forced to defend Sun's Community Source License, a quasi-open source license for Java 2, Jini, and other Sun technologies that requires developers to fix bugs, pass compatibility tests, and pay Sun royalties if they ship products. "If you go from capitalism to the commune, where there are no trademark and property rights, you can't guarantee 'write once, run everywhere', " he said. "You don't see Linux on Sony cameras and smart cards."

Some questioners argued that embedded Linux is widespread, and McNealy declined to argue further. But he did say 71 percent of Fortune 1000 companies are using Java and claimed "the rest are going out of business... Sun is a controversial stock and I hope it stays that way. If everybody bought into SCSL, we would have no differentiation and no advantage."

McNealy talked up the benefits of Java and Jini. He said everything digital will be connected to the Internet, including high-end autos -- which have up to 100 microprocessors -- and Java-enabled dishwashers. He predicted there would be 1 billion digital phone users by 2004. He also talked about the Internet's power to disrupt the supply chain, claiming that the Internet startup Webvan "will blow away grocery stores. There will be a lot of ex-CEOs playing golf as the bricks and mortar give way to clicks and mortar."

Sun demonstrated its SunRay appliance and StarOffice, although a glitch prevented half the audience from seeing the first part of the demo. A client version of StarOffice was given to every Comdex attendee.

Sun also demonstrated an OnStar portal for a General Motors 2000 Seville to ship next year. The portal can be customised and offers voice-enabled access to e-mail, calendar and other information selected by the customer.

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For full Comdex coverage, see the Comdex '99 Special Report .