Sun Microsystems has announced its 3rd Quarter earnings - and its stock promptly took a substantial hit. No wonder, since the company managed to report a loss of $34 million instead of the profit that analysts were expecting, and may be cutting up to 7.5% of its employees - 2500 jobs. While this certainly isn't good news for Sun, it's not great news for open source either, since the company has staked its future on shipping all of its assets as open source, including the recently-purchased MySQL database.
A detailed look at the reported financials shows that beyond the earnings numbers there are some other troublesome weak spots. Total net revenues are down compared to a year ago, which means that this is not just a reflection of one-time expenses (though the MySQL acquisition did result in the difference between break-even and a 4 cent per share loss). Compared to 9 months ago, cash is down (bad), inventory is up (bad), and goodwill has been upped by over $750 million - presumably accounting for the huge purchase price paid for MySQL. The net result is that shareholder equity - the actual worth of the company to its owners - has dropped by nearly $1.4 billion in the last 9 months.
Sun blames the weak US economy for much of its troubles, but it's clear that if business doesn't turn around for them (and they're not forecasting a booming 4th quarter), open source is going to get part of the blame. If they don't execute on the plan to make profits from services and sales related to open source, eventually that MySQL goodwill is going to come in for a second look - just as it did at AOL Time Warner.
The current news is not so bleak as the stock price drop might lead you to believe. After all, the company did still sell over $3 billion in products and services in the January-March quarter. And one quarter does not necessarily indicate the company's future earnings potential. But the situation does warrant close monitoring, both by investors and by those outside observers who are hoping that a company of Sun's size can, in the long run, provide a ringing endorsement of open source as a corporate strategy.
Comments
Add CommentBy JAtken on May. 02, 2008
One swallow doesn't make a summer, but one had quarter can cast doubt on the movement? There are a ton of companies that have been very successful with Open Source. Look at RedHat. Sh*t - look at MySQL! If adoption is growing, and companies can make money by USING FOSS, you cannot really blame Open Source for their woes.
By Nick on May. 02, 2008
Whistle! Flag on the play, 10 yards...
Sun has been falling out of favor for over a decade. I am an old UNIX guy and can tell you it has been a long time coming. Sun has never embraced open source fully. They dabble where it is comfy and beneficial. Look at the recent OpenSolaris community shakeup as an indication. You can't decide to wake up one day and start something your corporate culture isn't capable of understanding. Good luck Sun, but this is in no way indiciatave of opensource issues.
I absolutely agree that Sun's performance shouldn't reflect on the business viability of open source as a whole. But with the MySQL purchase, like it or not, they've thrust themselves into a very prominent spot as an open source bellwether. What worries me is not so much how they look to people who are already familiar with open source as how things look to those who never paid much attention before.
By Niche Inspector Review on May. 03, 2008
A loss of $34 million is huge. Bad that Sun Microsystems adn bad for open source.
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