Monday, August 19, 2002 - Page updated at 12:00 AM

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Q&A: No standing in shadows for Sun Microsystems chief

Seattle Times technology reporter

SAN FRANCISCO — Sun Microsystems Chief Executive Scott McNealy must be a brave man.

After spending last week bashing Microsoft at the LinuxWorld trade show here — and a career poking fun at Bill Gates and company — the outspoken and political executive is venturing into the heart of Microsoft country this week to watch the NEC Invitational golf tournament and play a round at Sahalee Country Club, home to more than a few Microsoft loyalists.

Skewering Microsoft is one way Santa Clara, Calif.-based Sun sells its computers and lures programmers to its software-development platform.

McNealy has done more than joke. Sun has supported the antitrust case against Microsoft, filed a complaint in Europe that prompted an antitrust investigation there and filed a private antitrust suit after U.S. courts found Microsoft liable for anticompetitive business practices.

One source of friction has been Microsoft's effort to slow adoption of Sun's Java programming language. In an earlier case, Sun won $10 million after suing Microsoft for breach of contract over the way it altered Java support in Windows.

Sun and Microsoft don't compete directly on sales of their primary products. But they both want their software platforms to be the dominant tool used to run the devices and services of the future.

In an interview with The Seattle Times last week, McNealy discussed Sun, Linux, government stimulus efforts, stock options and working with Microsoft after the antitrust litigation is resolved.

Here is an edited transcript:

Q. Do you consider Linux and open-source software a revolution?

A. Sharing is not a new thing. Sharing in our industry would have happened a lot more had (IBM) not grabbed the server monopoly a long time ago, and then (Microsoft) grabbed the desktop monopoly. I've always said A through Z, 0 through 9, grammar, syntax and basic math should not be copyrightable. Microsoft says "I'm going to own the alphabet. I'm going to add new characters. I'm going to charge you extra for the vowels. And I'm going to own grammar and syntax, too."

That becomes a situation where it's a lot tougher to share and a lot tougher to stand on the shoulder of somebody else's work. So the community's out there trying to go do this now.

Q. What is driving open-source's momentum?

A. The absolute backlash against the closed, proprietary interface worlds of IBM, Microsoft and others.

Q. You have proprietary stuff, as well.

A. We have proprietary implementations, not interfaces. It's very different. Where you put a car brake is a specification: It's a pedal about this big, left of the accelerator, that when you step on it with so many foot pounds of pressure will stop the car at 60 mph within X number of feet. How you implement it — four- wheel disc, two drums, heel to pavement — is your proprietary implementation. That's where you add value.

The open-source community has gone another step and said we're going to have open implementation. There's good news and bad news in that.

In places where it just causes problems to have multiple implementations, let's have one implementation. But where it's real critical or a vertical market niche or where you add your secret sauce, you're probably going to have a proprietary implementation. There's nothing wrong with that but I think interfaces are a different issue.

Q. Can open source sustain itself if developers don't make proprietary software?

A. I think it will try. We're going to make money selling systems that run Linux. We'll make money doing services for the systems that run Linux. We'll make money selling applications and software that run on top of Linux. So there are ways to make money around this environment.

Q. Can an open-source software community go on forever?

A. There will always be people who donate code to the community. It's human nature to do things and say I don't want to profit from this, I want the world to have access to it. I think that's a wonderful thing. I am not for abolishing intellectual-property capabilities — they might need to be tweaked — but owning intellectual property is something people have a right to.

Q. Speaking of cars, Cadillac introduced the (unsuccessful) Catera to go downmarket. You introduced the LX50 server.

A. We're not going downmarket, we're going to the same customer. Cadillac was trying to go to a different customer.

Over here you have app servers, over here you have database servers, over here you have edge servers. We were installing all this stuff, we just weren't selling the edge servers. So now we are.

Q. When do you expect the economy to turn around?

A. There's no telling. There's a lot of work that should be done that isn't being done. The government could be enforcing the antitrust laws. They could be giving out remedies, not rewards. They could be simplifying the tax code ... (and) accounting standards. They could be reducing the size and scope of government. Creating terror in every investor's eyes by insinuating CEO integrity is the source of all problems here is a little bit of pre-election diversion: "It's not me, it's them."

Q. You mentioned (in your LinuxWorld keynote) that open-source folks will need someone to back them on the legal front with Microsoft. Will Sun do that?

A. I'm too busy trying to protect our own (intellectual property). I'm not going to fight other people's battles for them.

Q. Can you talk about your role countering Microsoft?

A. There are a lot of people threatened by Microsoft. I have no problem being ... a solution to some or all of their concerns. We provide an alternative, we provide choice, open interfaces, competing implementations.

We have a very focused business model, a very clear charter. We tell (companies) what we're going to do and what we're not going to do, and where we can partner. So it's very clear who our friends and who our enemies are.

Q. Do others share your sentiments?

A. We're the only computer company in the world that Bill Gates and Steve Ballmer have zero leverage over because we don't do any business with them. We don't resell their stuff, they don't resell our stuff. So I can say whatever I want and they're not going to, like, change the licensing terms on me.

Q. Has Microsoft's new licensing plan helped Sun?

A. There's no question. The takeup on StarOffice (Sun's productivity suite) is unbelievable. I think if you get a few cocktails in their senior executives, the thing that scares them most right now is StarOffice and what it can do to their dominant cash cow, Microsoft Office. Every time we sell StarOffice at $20 or $30, that's taking $300 to $500 right off the bottom line at Microsoft.

Q. After the antitrust case is resolved, will Microsoft be a company you would want to work with?

A. No. I've seen Microsoft's rhetoric change. But have I seen any activity change? No.

Q. Do you expect private antitrust suits, including yours and AOL Time Warner's, to have as much effect on Microsoft as the government suit?

A. All you can hope for is justice. It's a great system, it's as good as any, but it ain't perfect.

Q. Do you have the resources to keep going with the litigation if Microsoft appeals unfavorable rulings all the way to the Supreme Court?

A. That's (Microsoft's) strategy: Delay, appeal, delay. Try to wear the other company into oblivion. We're in it for the long haul.

Q. How concerned are you about your stock price and retaining employees when options are losing value? How is that affecting Sun and the industry?

A. I think it affects everybody. I think options are OK. I think it's a shame the stock market got so overheated a few years ago because it set expectations at levels that are not achievable, not sustainable and not right. Yet employees can't understand why the options we gave out back then aren't very valuable. So that's a problem.

But we've got, I think, a very understanding shareholder base who understands they've gotten for the last three or four years a whole bunch of employees to work for options that are all underwater at lower salaries than they might have. Shareholders should be thrilled to death with options.

Q. What will happen to the tech sector if it keeps relying on options as compensation?

A. I'm not an economist. But if stock options go away, you'll see a much greater chance of misalignment between employees, management and shareholders, which is not a good thing. You'll see a lot less ... dynamic innovation.

Q. You're giving away software applications with the LX50 server. With that approach, will you be able to continue funding research and development?

A. We'll continue to do it. We're leveraging off the open-source community so we don't have to do it all ourselves, either. That's the beauty of open interfaces and open implementation — you don't have to do it all yourself.

Brier Dudley: 206-515-5687 or


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