Sun rolls out new server

September 25, 2001: 3:05 p.m. ET

Sun Fire 15K is latest salvo in heated server war with IBM, HP

NEW YORK (CNNfn) - Shares of Sun Microsystems rose nearly 3 percent Tuesday following the debut of the company's newest high-end server.

The new Sun Fire 15K is the most powerful in the company's line of servers, which are large computer systems used for everything from hosting Web sites to executing bank transactions.

Executives of Sun (SUNW: unchanged at $8.73, Research, Estimates) unveiled the Sun Fire 15K, also known as Starcat – which they say runs about three times faster than its predecessor, the E10000 – in New York City Tuesday. The machines range in price from $10,000 to more than $10 million, and could outpace the old model by five times as they are improved over the next two or three years, Sun executives said.

VIDEO

Scott McNealy, Sun's chairman and CEO chats with CNNfn about a new line of servers and his company.
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Sun was among the thousands of companies directly affected by the Sept. 11 terrorist attacks on the United States. One of its employees perished on one of the hijacked planes that were used to carry out the attacks, and its New York office, which had been in the World Trade Center, was destroyed.

Scott McNealy, Sun's chairman and chief executive, told CNNfn the company had considered canceling the product debut event in light of the tragedy. But he said it decided to move forward at the behest of New York City Mayor Rudolph Giuliani, who has urged people to try to return to normalcy. (240K WAV) or (240K AIFF)

Built on Sun's latest microchip, the UltraSPARC III, the Sun Fire 15K is Sun's latest salvo in an ongoing battle for dominance in the Unix server market.

Sun is the leading supplier of Unix servers, so named for the operating system they run. However, it has faced a growing threat from competitors IBM (IBM: down $0.54 to $94.26, Research, Estimates) and Hewlett-Packard (HWP: down $0.11 to $15.99, Research, Estimates), each of which has substantially stepped up its efforts in the Unix market.

At the same time, growth in the overall server market has slowed substantially, rising only a fraction of a percent in the second quarter, according to technology research firm Gartner Dataquest.

IBM is set to release its newest high-end servers, code-named Regatta and built on its newest Power 4 processors, in about two weeks.

UBS Warburg analyst Don Young characterized Sun's announcement Tuesday as "bittersweet."

"Bitter because delays in the copper UltraSPARC III processor pushed the launch 18 months behind schedule, leaving the door open for IBM to gain ground. Sweet because the Hewlett-Packard/Compaq Unix landscape offers fertile ground to take share," Young said in a note to clients.

Hewlett-Packard earlier this month said it would acquire Compaq, a deal many market observers expect will lead to short-term market share losses for each company as the two tech titans combine their operations.

UBS Warburg's Young also pointed out that the high-end Unix market accounts for roughly 30 percent of total Unix sales and Sun has been losing market share over the last few quarters while IBM has gained share.

In the months ahead, Young said, he expects the competition between Sun and IBM, which already has been fierce, to become even more so as the two companies continue to do battle in an increasingly harsh environment.

"In case there is any doubt, the good old days for Sun are gone -- Sun no longer writes the rules and the competitive landscape has been leveled with IBM's Regatta about to set sail," Young said.

"IBM's ability to leap-frog Sun's UltraSPARC III technology points toward a Unix market that will become increasingly commoditized, giving the long-term advantage to IBM whose diversified revenue stream (i.e., global services, financing, software, etc.) will provide more stability in earnings," he added.