McNealy: Crisis? What crisis?

Sun CEO Scott McNealy has spent the last two days in endless rounds of meetings with customers and the media at his company's first European user conference in Berlin and, not surprisingly, the question of Sun's financial situation and future prospects has cropped up on more than one occasion.

Sun came in for heavy criticism from Wall Street analysts following a $286m loss on declining revenues at its last quarterly results. Questions are also being asked about its ability to compete in the low-end market against rivals such as Dell, with anecdotal evidence suggesting customers in its key financial services market are increasingly turning to HP and IBM.

Yet, as you would expect, McNealy isn't about to admit there's a problem with its strategy. SunNetwork 2003 in Berlin has seen the company reinforce its vision of 'network computing' and a victorious Java along with product announcements around its Java Enterprise System and Java Desktop System low-cost software bundles, AMD's Opteron chip and a range of low-cost servers.

Trying to pin McNealy down on Sun's financial situation and alarming revenue declines in its core business areas is met with short shrift and his now stock response “cashflow positive in nine straight quarters, and $5.5bn in the bank”.

Speaking to silicon.com in Berlin today McNealy maintained the only challenge facing Sun is getting its message across to customers and said the public perception of his company is down to the spin put out by its rivals and analysts. Customers, he said, “can't find a hole” in Sun's strategy.

“Everybody's got an angle,” he said. “IBM, HP and Dell are positioning Sun.”

Mention talk of a 'comeback' or 'turnaround' for Sun and McNealy is not impressed. “I don't think we ever went anywhere,” he said.

One area where Sun has scored a big win recently is its deal for half a million Linux desktops with the Chinese government-backed China Standard Software Company consortium that could potentially run into “hundreds of millions” of licences for Sun's Java Desktop System.

McNealy expanded on his comments yesterday that Sun won't actually make much money on the deal.

“We're going to make money on Java Desktop. We're not doing this for charity. Imagine if China had adopted Windows. Whose servers would they have used? We'll go in and sell servers, storage, Java Enterprise System, services and financing,” he said.

Despite this massive deal business take-up of Linux on the desktop elsewhere in the world is still something of a pipedream for open source advocates – as is getting a straight answer from McNealy to the assertion that very few companies are actually switching their desktop environments from Microsoft to Linux.

“The farther you get from Redmond the better chance you've got,” he said.

Certainly no-one is doubting Sun's innovation and the quality of its technology but the challenge remains for McNealy and his colleagues to convince users that Sun's architecture and infrastructure is an affordable and long-term alternative to its rivals, especially at the low-end of the market.