Looking Back at Days in the Sun
Schwartz's first startup, Lighthouse Design, had developed software exclusively for Steve Jobs' NeXT Computer. But when NeXT began failing in the marketplace and the Internet began to explode globally, Lighthouse was acquired by Sun in 1996. Schwartz joined Sun and stayed there for 14 years. Looking back, it's clear that Sun, a company loaded with brilliant thinkers, had well-known marketing and sales issues. Even more critical, it had a timing problem.
The company made boatloads of money for some 15 years in the 1980s and '90s by selling expensive proprietary workstations: server and storage hardware/software packages that only Sun and SGI could provide to big-ticket customers in financial services, the military and government. Some of the SPARC-processor-powered workstations cost $40,000 to $60,000 apiece.
Who knows what might have happened to a combined Sun-Apple company if the deal had gone through at $6 per share, as former Sun President Ed Zander and co-founder/CEO/Chairman Scott McNealy tell the story. But the deal did not take place. Later, Sun was slow in moving to less-expensive x86-based alternatives when Linux, Intel and Microsoft brought new products into the enterprise in the late 1990s, and the big-ticket enterprise market dried up. When the tech bubble popped between 2000 and 2002, Sun suffered big losses, as did many technology companies. And when the world macroeconomic crash struck in 2008, a number of Sun's top customers were hit so hard they went belly-up. "Fully one-third of Sun's sales were from the financial services sector," Schwartz said. "We were hurting big time." In 2003 and 2004, Sun was losing hundreds of millions of dollars; by 2008, the loss was more than $1 billion a year. At that point, the downward spiral was unstoppable. Not even well-respected executives like Schwartz and McNealy could pull Sun out of its death spin. Sun: Too Early to the Cloud
Another timing issue was that Sun was too early to the cloud (then called Web services and not understood by a majority of enterprises), providing enterprise-level online storage and computing capabilities before anyone else. The execution of those services had problems, and the original service was eventually shelved for upgrading. However, the biggest issue was that most enterprises and consumers didn't have the bandwidth or on-site IT systems required to use these services efficiently, and many didn't trust housing their data in such a newfangled solution. That's how it often goes with pioneers. "We were also a little early for big enterprises to start spending the kind of money you'd want to see," Schwartz said. The vision that Sun had a decade ago is now being realized and refined by companies such as Amazon (with its Elastic Cloud services bank), eBay, Netflix, Salesforce.com, Microsoft, Hewlett-Packard, Dell, IBM and a number of others. "Amazon, as one example, continues to execute on that vision," Schwartz said. "They're doing brilliantly well. "The cloud world hit CRM first, partly because Salesforce did such a great job. Now every other aspect of the enterprise is being automated."