Sun Microsystems is experiencing some tough times. They’ve restructured every year for the last seven years. Their revenues just dropped 7%. And they’re forecasting a loss of 2 to 12 cents a share for the quarter. Now their largest shareholder, Southeastern Asset Management, has increased their stake in Sun to 21.2% of the company. The investor is in talks with Sun’s management team about new ideas for turning the company around. One of the reasons that this is interesting is because Southeastern Asset Management has expressed the opinion in the past that Sun is a software company, not a hardware company.

So rumors are spreading about what, exactly, they’re looking for Sun to do. Some ideas:

  • Fire the CEO
  • Sell the hardware business
  • Sell the failed acquisitions, e.g., StorageTEK

Either of the first two options would bode ill for Sun’s newly found open source love. Their CEO, Jonathan Schwartz, has drunk the open source kool-aid. Sun has open sourced Solaris, ZFS, DTrace, Java, MySQL (the proprietary bits) and a number of other technologies. If their investor truly believes that Sun is a software company then they might view this as giving away the companies best assets.

If Sun does sell their hardware business then it also bodes ill for the SPARC line of processors. It’s been Sun’s sheer force of will that has kept that processor line alive. Everyone else has succumbed to the Intel/AMD train. It’s unlikely that a buyer could keep the processor line from becoming anything other then a niche product.

This makes Sun look shaky, weak and a poor bet for long-term IT spending.