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Sun Still Shining Because “Cash is King” Wednesday, 9 October 2002 Scott McNealy, chairman and CEO of Sun Microsystems, says his new haircut is like IT budgets these days — "short." The response got a big laugh, one of many Mr. McNealy enjoyed during his Mastermind Keynote Interview Tuesday morning. His questioners were Gartner Group Vice President and Research Director Daryl Plummer and Gartner Vice President Laura McLellan. "It's ten bucks," Mr. McNealy said in response to Mr. Plummer's inquiry about Mr. McNealy's military-style crewcut. "If you want one, it's No. 2 at Supercuts. It takes about four minutes, once a quarter, whether you need it or not." On a more serious note, Mr. Plummer followed up with a question that is on the mind of Sun's shareholders and customers these days: With Sun's stock in the two-and-a-half-dollar-per-share range, can Sun survive? "What the big companies are trying to drive is consolidation," said Mr. McNealy. "…Obviously, there are a lot of big companies that are evaporating before our eyes. The real issue here is cash is king. You've got to follow the cash. There's a great saying that 'earnings are opinion, cash is a fact.' We're generating cash every quarter for the last 12 or so quarters. We've got $5 billion or $6 billion of cash, almost no long-term debt. We are as viable and investment-oriented a company as there is out there in the marketplace." Asked by Ms. McLellan what he says to rumors of another company possibly taking over Sun, Mr. McNealy joked, "I just rattle my golf clubs and say, 'C'mon down, if you think you can run this sucker. Have at it. We've got a $9 billion or so market cap, you're going to have to pay a premium on that. You're going to have to pay cash because I don't want your stock, no matter who you are.'" Mr. McNealy went on to say he feels comfortable that Sun won't be acquired, since companies with enough money to buy Sun would likely face antitrust issues, while companies that wouldn't face that stumbling block don't have the necessary cash. "So I think we're fine there, and we've got a good, long-term strategy that nobody's going to mess with," he said. No interview with Mr. McNealy would be complete without mention of what he described as the "M" word — Microsoft. Asked by Ms. McLellan to describe the chief difference between Microsoft's .Net and Sun's Sun One strategies, Mr. McNealy said Sun's strategy is that "we have an integratable approach," which allows enterprises to more easily build architectures using a best-of-breed applications. "That's very different from the .Net strategy, which says, 'Here it is, it's all integrated, it's welded shut. You can't pull our browser out without shutting down XP." McNealy also defended Sun's strategy of offering many of its software products free or at very low prices. "If you're paying for middleware, stop," he said. "Don't spend $50,000 a CPU on an app server. We've got a very, very good — way better than 'good enough' — app server bundled into Solaris." He also cited MySQL, Star Office, and Linux-based products. Michael Calvert Gartner Staff |
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