J A NUA RY 2 0 0 6
Courtesy Sun Microsystems
Sun Microsystems CEO Scott McNealy says the 2-inch-square Niagara processor is at the heart of his company’s new environmental initiative, an ambitious effort to boost profits.
Can Eco-Responsibility make Sun shine?
BY C ELESTE LE C OMPTE
W
hen times were good in the dot-com era,
they were very good for Sun Microsystems
(Nasdaq: SUNW). The fast-paced, venture
capital-fueled companies were building out data
centers and filling them chock full of Sun’s
expensive, high-end Web servers. But the days
were numbered, and when venture capital ran
out, many of Sun’s customers folded. The
company’s stock tumbled steadily from pinnacle
prices of more than $100 to today, where shares
have been trading steadily at about $4.
Now, the company is gearing up to stage a
comeback, and CEO Scott McNealy says the key is
the company’s new Eco-Responsibility Initiative.
While the dot-com crash goes a long way
toward explaining how Sun fell so far, so fast, it
doesn’t explain why Sun hasn’t been able to pull
out much of a recovery. Another part of Sun’s
woes — perhaps the most damaging over the
long run — is related to broader shifts in technol-
ogy demand. Sun’s core market is in providing
products and services for network computing,
where individual computers are connected over a
network, and servers, powerful centralized
computers, store information and run different
programs and operations. The server industry is a
$50 billion market and comprises a lot of differ-
ent products, prices of which range from $1,000
to more than $1 million. The portion of the mar-
ket where Sun has made its business, however,
has been slowly declining over the last several
years, according to David Wong, an analyst with
A.G. Edwards Inc. (NYSE: AGE).
Perhaps to make up for losses in its server
market, Sun has embarked on several high-risk
initiatives designed to turn the company’s poor
revenue performance around. Sun has sunk
approximately 15 percent of its revenue into
research and development activities — compared
with just 5 percent spent by competitors such as
Microsoft (Nasdaq: MSFT), IBM (NYSE: IBM)
and Cisco (Nasdaq: CSCO), according to Brent
Bracelin, an analyst with Pacific Securities. In
terms of actual dollars, Sun isn’t outspending its
competitors, but Wall Street has punished the
company for “overinvesting,” says Bracelin. Worse
SIJ Feature
yet, Sun hasn’t produced much of a payoff.
Now, Sun says it’s set to enjoy a long-awaited
return on investment, with the roll out of its latest
product line and the Eco-Responsibility Initiative.
Changing the conversation
Sun’s Eco-Responsibility Initiative comprises
three main strategies: improving the efficiency of
server technology, driving a shift from personal
computers to networked displays called “thin
clients,” and emphasizing reduced resource use
in its own operations.
“First and foremost, we believe that energy,
space and innovation matter,” says Ed Hunter, a
senior technical advisor for Sun. “Second, we
believe that network services will rule, and that vol-
ume always wins. That’s the big picture for Sun.”
Although a key new product, the latest Sun
Fire server, headlines the initiative, Hunter readily
admits the Eco-Responsibility Initiative ties
together a lot of products and services Sun has
already introduced.
“The development of Eco-Responsible products
Sustainable Industries Journal 23
SIJ Feature J A NUA RY 2 0 0 6

is a logical extension of Sun’s current design
philosophy,” Hunter says.
That may be, but the timing appears right, too.
With oil prices high, it makes economic sense,
McNealy said at an event launching the Eco-
Responsibility Initiative. “People wonder, what are
you up here for, what are you doing?,” he said.
“Well, we’re here to make money. Understand
that. But we think we can do that in a way that
pays off not only for our shareholders but for
everybody on the planet.”
Getting technology users to talk about energy
hasn’t been hard. Energy efficiency is at the heart
of Sun’s Eco-Responsibility Initiative, and new
products, services, and company policies wear it
on their sleeves. Sun’s strategy taps into many IT
managers concerns about energy use, data center
design, and spiraling energy costs.
Faster processors take more power, and more
power makes the machines hotter, which requires
more cooling for buildings where servers are
housed. As a result, data centers today can use 50
to 60 watts per square foot, according to Jonathon
Koomey, a staff scientist at Lawrence Berkeley
National Laboratories, compared with 5 to 8 watts
per square foot in the average office building.
Individual companies are feeling the pinch of
higher energy prices and looking to make cuts in
their consumption.
Sun’s marquee products for the Eco-
Responsibility Initiative are the Sun Fire T1000
and T2000 servers. Both models use a processor,
nicknamed Niagara, that reportedly uses just 56
watts of power — less than a standard light bulb,
and just half that of Intel’s competing Xeon
processor, according to Sun.
Niagara servers also have a “wow” factor Sun
believes will lure new buyers. Using what’s called
“multi-threaded” design, Niagara can perform as
many as 32 separate tasks at a time. By compari-
son, Intel’s Xeon processor can only handle four.
What remains to be seen is whether Niagara can
perform the tasks as quickly, critics say.
To the uninitiated, it may sound like a bunch
of boring tech talk, but the market is listening —
and it seems optimistic. In early December, Sun
announced that eBay’s (Nasdaq: EBAY) PayPal
division is piloting the servers, and there are sub-
stantial rumors that Google (Nasdaq: GOOG) is
set to purchase Niagara-based servers as well.
If Niagara takes off the way Sun hopes, the
environmental impact could be substantial, says
Hunter. “We’re talking about saving considerable
amounts of power,” he says. If half of the entry
servers (those priced under $100,000) sold in the
last three years were replaced with the Niagara
processors, “over 11 million tons of CO2 emis-
sions, or the equivalent of that emitted by about 1
million SUVs, would be eliminated each year.”
But Sun’s not alone in the energy-efficiency
game. Most of the major manufacturers, as well
as new competitors such as Santa Clara-based
P.A. Semi, have zeroed in on energy efficiency in
both processors and servers. Meanwhile,
Lawrence Berkeley National Laboratories, the U.S.
Environmental Protection Agency and the Rocky
Mountain Institute have all undertaken projects
with industry partners to help minimize data cen-
ter energy use through other design innovations.
While Sun got a jump on competitors with its
2006 release, the proof is in the pudding, and
customer response could make or break the
company’s risky new strategy. In press interviews,
McNealy has repeatedly acknowledged that
investors won’t be convinced until customers
begin buying the product and sharing their —
hopefully positive — experiences. Servers are
expected to ship in March 2006.
“How do you change the conversation?”
McNealy asks. “How do you get customers to actu-
ally think about this and actually buy it? I mean,
[what] if you go invent it and nobody uses it?”
Getting customers to use its products — no
matter how great they might be — presents a true
challenge for Sun. The company has been criti-
cized by investors and users alike for focusing
exclusively on its own, in-house products —

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J A NUA RY 2 0 0 6
The server farm (left) at the National Energy Research Scientific Computing Center uses heavy amounts of energy — a key selling point in Sun Microsystems’ newfangled marketing efforts (right).
hardware, software, and services that work best or
work exclusively with each other. While the tech
industry has slowly migrated toward creating
compatible components, Sun has lagged behind.
Even with recently announced initiatives
designed to open up its products to the market-
place, Sun is still focused on doing things the way
Sun thinks they should be done, says Scott
Kveton, associate director of the Open Source
Lab at Oregon State University.
Even if that’s good for the environment and a
company’s bottom line, users are resistant to
being told what’s best for them. “That’s not how
people want to do it,” Kveton says.
The same problem could plague what seem
to be the company’s most environmentally inno-
vative technologies.
‘The Network is the
Computer’
In the late 1980s, Sun Microsystems coined its
slogan, “The Network Is the Computer,” meant to
communicate the company’s view of computing
as a service, rather than computers as a product.
The Eco-Responsibility Initiative, beyond the
eye-popping efficiencies touted for Niagara
attempts to re-launch the idea. “Our whole view is
that people shouldn’t own computers, they should
use them,” McNealy said in November.
What that means is a shift away from personal
computers and greater dependence on broadband
networks and shared servers to provide comput-
ing power. Sun envisions a future where comput-
ing — from low-end tasks like word processing to
Courtesy Lawrence Berkeley National Laboratory
Courtesy Sun Microsystems
high-end financial services analysis and virtual “As we lower the cost of network computing,
modeling — is stored on highly efficient, shared you’re going to see fewer people having to hop in
servers, and accessed by logging into network- their cars and do things,” says McNealy. “There’s
enabled thin clients. Sun calls it “Desktop over going to be more reason to have a broadband net-
IP” (Internet protocol). work into your home and let the network do your
Thin clients use about one-tenth of the energy driving for you. So we’re pretty excited about it.”
required to run a standard PC, says McNealy. Sun, The question remains whether users will be as
which uses the technology in its own offices, excited about it as Sun. In February 2005, the
estimates it saves about $2.8 million dollars per company introduced its Sun Grid “utility comput-
year in energy costs alone, and an additional ing” service, which would provide the functions of
$21.2 million in other system costs. On the in-house data servers over a network connection
production side, thin clients cut raw material use for “a buck an hour.” The first retail customer
by a factor of 150, according to Hunter. signed in November.
What’s more, thin clients let users access their Despite the slow start, Sun announced in
desktop from any machine. The flexibility allows June that it would spend $4.1 billion to acquire
the company to radically change its office foot- StorageTek, a data storage company. That’s a big
print. Nearly half of Sun’s employees can work gamble, considering it’s the last serious cash deal
away from the office, or in shared “hotel offices,” Sun can afford in its current financial state.
saving the company $300 million in real estate
costs, according to Business Week online.
While the purchase stretches Sun thinner,
some analysts believe data storage has been an
“It’s awfully expensive to outfit, build an office,
air condition it, put lighting in, all the rest of it, so
Achilles heel for the company. The purchase
could put Sun in a better position to move for-
that you can hang a picture of your Chihuahua on ward with its long-term goal of expanding net-
the wall and have a nice warm cozy place for that work computing — and lessening the environ-
thing to be all the time,” quips McNealy. mental impact of its business. Better data storage
Thin clients also have the potential to extend may allow Sun to provide greater security for sen-
the life of older hardware by delegating high-end sitive intellectual property on the Sun Grid. With
processes to the networked servers. that piece of the puzzle in place, Sun’s stars could
“A thin-client model could slash the number of be re-aligning after five years of adjustment.
central processing units manufactured for com- For now, Wall Street remains cautious. “Sun’s
puters ... by allowing older or less-powerful ones done a lot to help revive growth at the company,
to be useful for double, triple, maybe five times as but that has not yet materialized,” says analyst
long as they are now,” says Jeremy Faludi, a free- Bracelin. “They’ve bet the farm, if you will, on
lance designer and consultant based in Seattle. some of these new products or initiatives. And at
Sun appears to be banking on a gain in this point, the jury is still out whether it will pay
popularity for this kind of networked computing. off or not.” G
Sustainable Industries Journal 25