Sun's Scott McNealy: The bet's still on network computing

"We don't try to hide complexity behind an army of high-priced consultants; we engineer it out of the system as much as we can"

He's an ace golfer, a hockey enthusiast, a Microsoft basher, but more importantly one of Silicon Valley's most spirited CEOs, who for the last two years has been trying hard to prove wrong critics writing his company off. And for Scott G. McNealy that's proving to be anything but easy. Since 2001, the Co-founder, President and CEO of Sun Microsystems has seen his company's revenues plummet from $18 billion to a little over $12 billion; $1.8 billion in earnings have turned into losses of $587 million, and Wall Street couldn't care less about the stock. On his first visit to India, where he's given away $300 million worth of Sun software, McNealy defended-part over e-mail and part in person-his vision and his company. Excerpts from an interview to BT's R. Sridharan:

I am told this is your first visit to India. First impressions?

Glad to be here finally. I feel guilty for not having been here past 21 years. We've got so much going on here. So many employees, so much of engineering and sales, so many good customers and partners.

What are your plans in India?

India has a large and talented developer community and the mission to grow itself globally. Sun can help build a world-class it industry with our infrastructure solutions, best in class systems and services organisation.

People are saying that Sun is turning out to be an also-ran in the computer industry.

The race is far from over. Watch us and evaluate us on the quality, innovation, and price/performance we bring to market over the next 18 to 36 months.

There's been an exodus of key executives. How has Sun coped with that? You have said that Sun will return to profitability in the second quarter of this year. What will make that happen?

The team we have in place is highly skilled and highly experienced. In fact, most of them have been with us for 10 or 11 years. The transition was well-planned-it had been in the works for a couple of years-and now we have a leaner organisation with fewer management layers, clear charters, and no overlap.

The long and short of it is we're executing well- holding down costs while bringing to market the most compelling product family in our history and extending our reach into wide range of industries.

Sun is diversifying into services, new markets, and new products. Aren't you becoming an IBM in the process?

Our primary focus is, and always has been, solving problems with better engineering. IBM has no incentive to do that. In fact, they have an incentive to make things as complex as possible, because they make their money off Global Services, which basically says, "If you have a wallet, we've got a Big Blue vacuum cleaner".

Don't get me wrong. Services are important. But you have to have the right balance and the right emphasis. We don't try to hide complexity behind an army of high-priced consultants; we engineer it out of the system as much as we possibly can. That's the right answer.

How is iForce doing? Is that helping you get newer customers and retain the older ones?

Partnership is in Sun's DNA and the iForce program proves it. The great thing about it, from the customer's point of view, is that they can come into one of our iForce centres and we'll put together a proof-of-concept for whatever they have in mind. Together with our partners, we'll demonstrate-free of charge-that we can make it work the way the customer wants it to.

Despite falling revenues, Sun hasn't cut back on R&D spend. What kind of work are you focusing on and why is it critical to your future?

We are spending about 10-15 per cent of revenue on R&D. Why? Because innovation pays. Anyone who thinks information technology has reached the commodity stage should come and talk to us. We see lots of room for innovation in everything from microprocessor design to the way software is developed and deployed.

A typical processor today can only run one thread at a time. But the processors we're developing are designed to link multiple processor cores on a single piece of silicon to process multiple threads simultaneously. Within two years, we intend to deliver blade processors with 15 times the throughput of today's blades.

We're also raising the bar for the whole software industry with Project Orion, a radical new approach to the design, development, and delivery of software. By moving all of our offerings onto a regularly scheduled "software train"-with each component required to meet stringent criteria before being allowed onboard-we're going to change the way people buy software. The customer will no longer need to be concerned with compatibility issues. If it's in the Project Orion system, it all works together.

Stay tuned, because we have a lot more on the way.

Do you expect sales of high-end servers to pick up once the economy revives, or is there some fundamental shift away from pricey, proprietary servers?

Different jobs have different requirements. Our aim has always been to provide the right system for the job. So we offer everything from compact 16-to-a-shelf blade systems to massive, high-integrity servers-all competitively priced. Simply put, it would be a mistake to spend more than you need to in certain areas or less than you should in others. For some jobs, a low-cost 32-bit system is just fine; for other, only the most sophisticated high-availability features will do. We offer the full range and make sure it all works together.

Won't the rise of Linux affect the sales of Sun's Unix-based servers?

It's not the rise of Linux, but the rise of open source, the rise of this lumber yard where you can build Unix-based system from a lot of the collective work that is out there. And Unix is winning big time. Apple's pushing it, Sun's pushing it, and it is running big time on the x86 environment of Solaris and Linux. We are pretty interested in Linux websites in our own right with Solaris x86. So, it's accelerating and it has taken a chunk of hide out of the Microsoft momentum. We are gonna push Linux on the desktop. We think that's where it belongs. We are talking to a lot of companies here to put that (MadHatter, Sun's Linux based desktop strategy) with a locally-built desktop pc to offer a non-Microsoft alternative.

Wall Street seems to be penalising you for being vertically integrated. Why do you think vertical integration in the computer business is a good idea?

Sun is a systems company. It's right there in our name: Sun Microsystems. This gives us a distinct advantage in that we're able to tune the various hardware and software elements to work together more efficiently. I'll give you an example of what I mean: If we just made microprocessors, we'd probably be focused on megahertz like our competitors. Instead, we're focused on throughput-the amount of actual work a system gets done. That's a lot less dependent on the processor than most people think. Processor speeds have been doubling about every two years, but memory speed has doubled every six years-a serious mismatch. We see that-and are addressing it-because we're a systems company.

Have you lost out on your battle against Microsoft?

We'll see. The battle isn't over yet.