At first glance, Sun Microsystems (NASDAQ: JAVA) appears to be having a bit of trouble: Big layoffs, a stock that is down 80 percent in the last year, and constant rumors about its demise or takeover. A brief look at the overall server and storage stats from IDC and Gartner doesn't provide much evidence to the contrary, with Sun nowhere in the overall storage stats, and lagging further behind Dell (NASDAQ: DELL) in fourth place on the server side.
However, there are some glimmers of hope at the company. Its storage business generates revenues of around $2.5 billion and has grown for the last five quarters, a period that includes at least three quarters of recession. According to IDC, Sun is number one in automated tape library sales (its StorageTek line). Even in external disk systems, it showed 16.1 percent growth, maintaining the top spot for UNIX-based disk storage.
Toni Sacconaghi, a financial analyst at Sanford C. Bernstein & Co., recommends Sun as a worthwhile investment. From its current price of $4 or so, the analyst predicts a rise to $7 or $8 per share over the course of this year.
Another analyst looking on the bright side is John Webster of Illuminata. While inherited product lines like StorageTek may be holding their own, and Sun has been doing a reasonable amount of business by OEMing products from the likes of Dot Hill (NASDAQ: HILL) and LSI (NYSE: LSI), he sees Sun's big push coming from its Open Storage products.
"As the Open Storage product line is Sun intellectual property, it has better margins," said Webster. "This area is growing at a faster rate than Sun's more traditional lines."
Sun's storage portfolio has expanded significantly, although much of it has been under the radar screen. As well as its well established tape libraries and disk arrays, it has accumulated a decent amount of storage software. On the management side it has the Lustre File System, Sun StorageTek Storage Archive Manager, Sun StorageTek QFS Software, Solaris ZFS, as well as an extensive range of software under the StorageTek banner for functions such as backup/replication, tape administration, mainframe management and snapshot.
In addition, it has quietly been beefing up an Open Storage category that combines open-source software with x86-based hardware. Jason Schaffer, senior director for storage products at Sun, claims this formula can bring about big savings compared to proprietary systems.
Sun's Open Storage Lineup
Products in the Open Storage arena include:
- Unified Storage Systems (S7000 series), which provide support for file and block data protocols, and include data services such as thin provisioning, replication, mirroring, snapshots, antivirus and analytics.
- Storage Servers, which Sun touts as packing twice the capacity in half the space and price compared to the competition.
- Storage Expansion Arrays (JBOD), in the form of the Sun Storage J4000 family.
Sun's bet is that Open Storage will continue to grow and will evolve into a major force in storage. But how much of a slice of the $40 billion a year industry it will carve out remains to be seen.
In the server marketplace, for instance, Linux has gone from nowhere 10 years ago to now generating close to $2 billion a quarter in revenue, and more significantly, accounting for 14 percent of all servers, according to IDC. If Open Storage can achieve similar success, Sun will certainly be one of the big beneficiaries.
Webster noted that Sun had been deluging the open source community with its software. The strategy is to spark innovation on Sun platforms by granting free access to the code.
"It's an interesting model; assuming the whole product category takes off, Sun is already a leader in it and others like LSI are looking at it," said Webster.
Data Grows as Economy Sinks
Despite the worst recession in decades, Schaffer said there is no slowdown in the amount of data that enterprises are generating, so they are being forced to re-think their time-honored data center architectures. This, he believes, will play right into Sun's hands.
"Storage will play a critical role in Sun's success," said Schaffer. "Sun's Open Storage approach means we can offer products like the Unified Storage 7410 System, which delivers enterprise-class storage at up to 80 percent less than traditional storage solutions."
Going forward, he anticipated further growth fueled by the increasing attractiveness of "free" software. As well as being a way to reduce costs, if Sun achieves the level of innovation it expects, this could open the door to several new developments. Schaffer hints that some surprises are in store.
"In 2009, we will continue to execute on the Open Storage strategy and bring unique archive and bulk storage products to market," he said. "Expect Sun to make several significant storage and server announcements."
One likely area is flash solid state drives (SSDs). Sun made some noises in this area during 2008, but it seems to be stepping up the intensity of its SSD efforts. Webster predicts that SSD technology will be applied, for example, to the Unified Storage 7000 Series. Sun isn't going into the specifics, however, at least for the moment.
"This year is likely to usher in a new era in system design, based on flash technology," said Schaffer. "Flash technology will radically change system/storage design and data center efficiencies."