Sun's Chinese deal 'shuts out Microsoft'

A deal involving millions of Chinese PCs running Linux on Sun's Java Desktop System will not make much money, Sun admits

Sun is aiming for "hundreds of millions" of desktops in China to be running Linux on its Java Desktop System as a result of its recent deal with the Chinese government -- but admits it won't make much money from it all.

Sun announced the deal for an initial half a million open-source desktop office software suites with the Chinese government-backed China Standard Software Company at Comdex in Las Vegas last month.

But speaking at his company's European user event in Berlin today, Sun president, chairman and chief executive Scott McNealy admitted the deal won't be a big money spinner.

He said it was a strategic rather than a "revenue play" -- in terms of preventing Microsoft getting hold of and locking down the lucrative Chinese market.

"We're not going to make a ton of money on the desktop software," he said.

McNealy bettered his usual car industry analogies around the theme of simplifying IT by driving onto the stage in a car, and his keynote rather predictably focused on the cost and complexity of IBM, and the Java versus Microsoft battle.

He again proclaimed Java had beaten .Net in the web services "battle", saying Sun beats Microsoft in every area except "virus delivery" and claimed Sun will deliver complete systems to customers instead of "400 mechanics with car parts" like IBM.

He delivered the company's latest releases and upgrades as part of Sun's decision to do them all together once a quarter. These included lower prices for a range of server products.

On the customer front, Sun said UK camera shop chain Jessops is deploying StarOffice for 3,000 employees along with a new point-of-sale system that will contribute to an overall cost saving of £2m.

McNealy ducked tough questions on Sun's financial performance, saying there is $5.4bn in the bank and that cost cutting and efficiency drives are on target to turn things around following the dot-com fallout.

"We hired too many people, signed too many leases and got our expense rates too high and we're dealing with an air pocket in our key markets [of telecoms and financial services]," he admitted.

John Collins, analyst at Quocirca, said Sun has good technologies but is not listening to customers.

"Innovation deserves to succeed, and Sun is second to none for architecture and infrastructure. But it has been hit harder than a lot of companies in this downturn," he said. "And I get the feeling Sun is still not listening to customers -- 'if you're not hearing us we'll tell you louder'. But Sun will survive for as long as Scott McNealy wants it to."