Why not look at gross margin $'s per employee... might be a more interesting analysis, given that Dell's strategy is basically "sell anything for revenue."

Yeah, Yo Fella has a point, sales can be a misleading number... but if you want to extend the logic of looking at gross margin, the key metric should really be earnings per employee and Sun wouldn't look good their either.

It's not really fair to compare Sun to Dell. Dell repackage someone else's operating system, does a modest amount of engineering to make sure the components fit and ... done.

Sun engineers some really amazing enterprise-class hardware, whomps up a state of the art operating system, plus bells and whistles to make it all work.

I've had Dell's server systems and they're good for the price but can't compare with Sun's offerings.

Ya, I know. Like the market cares. The sunset (get it) is looming fast for Sun. Poor bastards.

Poor us as well. Sun is one of good guys, from my POV.

I agree - Sun is one of the good guys. But it is incomprehensible why they sat on their ass so long. And then they went and bought .... StorageTek, which is a third rate company peddling obsolete tape drives. Sun could have spent that $4 billion in any number of ways, and they had to go acquire this piece of crap. Sigh ...

sidney - sun was buying a reliable revenue stream in storagetek, thats about it. anyway, the day of the boutique system vendor is over. even apple is peddling intel boxes. sun has enough cash to stay on life support for a long time though.

Compare Sun's execution post-bubble with that of EMC, which also got hit pretty hard. In fact, EMC Symmetrix line, the equivalent of Sun's enterprise server line, saw no growth for several years.

EMC spent its cash wisely, and transformed itself into a software company, with a series of smart acquisitions done at the bottom of the market. VMWare alone turned out to be sheer genius.

Sun sat waiting for a recovery that never arrived [for them], and instead of doing forward looking acquisitions, went and bought a tired old tape-drive vendor. What a waste of shareholder equity.

Scott, you are a good man, but you fucked up big time ...

Sridhar

Comparing Sun against Dell is pretty much a fools game and an untold number of companies have either been destroyed by doing it, or seriously injured in the process. Let me explain. Lots of tech companies, particularly hardware related, have used Dell as the boilerplate for an engineering plan moving forward. After all, how can you be profitable when you spend 12% of your revenue on R&D, when Dell uses less than a quarter of that. Let's say Dell is at 3%. That means they can undercut their competitors by 9% and not lose any money. So the companies, in hopes of competing with Dell, use the same R&D number. Hitting that low of a number requires pretty much dumping any sort of innovation over the side. Suddenly the value of the companies products goes down much more quickly than the cost, and the customers go to a competitor. Essentially there can only be one Dell and that seat is taken. Some companies recognize this folly and reverse course, but others don't and auger in.

I don't disagree that a blind comparison -- Sun == Dell -- is wrong-headed. But the inverse of your argument is not necessarily true either: Spending a high percentage of revenues on R&D in a market that will not reward you for the resulting "innovations" -- Sun's model -- is a loser strategy too.

Well, absolutely nothing is guaranteed. There are lots of companies that spend lavishly on R&D and don't have squat to show for it. Let's draw a parallel comparison, say Nordstroms and Walmart. If Nordstroms started going after Walmart, they would fail spectacularly. To draw comparisons is fairly senseless and misleading. Each company has to make their biz model work in their niche. In Walmart/Dell's case, thats savagely driving down costs. In Nordstroms/Sun's case, thats driving up perceived value and differentiation. It's like the iPod, you gotta give the customer a reason why they should pay a premium price for your product.

Dean -- I take your point, but it's somewhat tangential. I'm arguing -- and it's admittedly a debatable point -- that Sun's market is telling it that higher R&D spending is no longer being rewarded by commensurately higher margins. Persisting in spending disproportionate amounts of R&D, and being staffed accordingly, is therefore irrational -- not a point of strategy or differentiation.