CRN: One of your stated goals is increase storage sales as a percentage of sales. Given the competition in the storage market, can you really make that happen?
McNealy: If we do Happy Meal pricing, we can do it. If we run systems and storage as two separate groups, we won't. If we leverage them together, we can offer Happy Meal pricing to the customer.
CRN: Given falling prices, why do you think margins for Sun are holding up?
McNealy: I don't know why margins are holding other than the fact that innovation does prop up margins. We are making sure we have a whole new product line to sell. There are also a lot of new revenue sources for us now in government, international, retail and health care. But I'll tell you one thing, it isn't because IBM is backing off. IBM is offering some of our customers free equipment, so we're definitely not operating under the consent decree anymore.
CRN: What's your take on the industry movement to on-demand computing models that IBM is credited with pioneering?
McNealy: We actually provide a utility model around our N1 architecture and a subscription model such as $100 per employee, per year. We're actually providing the utility model of pay-as-you-go. I don't understand where IBM's pay-as-you-go model is. IBM's model is demanding as opposed to being on demand. There are no bodies attached to our services model. IBM's on-demand model is people on demand. We're actually trying to get customers to buy a subscription. We provide them with a Web services stack and power by the hour.
CRN: Most recently, Sun signed a pact to adopt processors for AMD. What does does Sun need to support Athlon in addition to Intel and SPARC processors?
McNealy: We're doing 32-bit Intel, 64-bit Opteron from AMD and we've got four big bets on SPARC with the UltraSPARC III, the UltraSPARC III , the UltraSPARC IV and the UltraSPARC IV . Coming later we have the Niagra and Rock SPARC projects. In the old days, if you wrote an application to SPARC/Solaris, you had to completely recertify it if you ported it to Solaris/X86. Today, if you write that application to the JES Web services environment properly, there should be no need for certification. This allows us to protect our customers' investment in the application. I don't want to build processors for the edge of the network when we can use Intel. I don't want to build a desktop chip when I can use Athlon from AMD. But I do want to protect my SPARC mainframe base, if you will. So now we can do more and focus on SPARC. Also, with Opteron, you will need multiprocessing. We're going to take that up to an eight-way system and above for Solaris. Long term, we expect that Opteron will be heavily weighted to Solaris. We're only going to a fairly simple thing with the Intel X86 architecture.
CRN: Ever given any thought to merging with AMD?
McNealy: AMD needs more volume than what they can get from Sun. Would Microsoft support AMD processors if they came from Sun? Would IBM buy chips from Sun? You have to think those types of things through.
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