Disclaimer: I own stocks in Sun Microsystems and AMD.

As I was reading The Innovator's Dilemma, I took particular interest in Sun Microsystems as a case study for the theory proposed in the book. Sun Microsystems used to be the darling of Wall Street, selling big, powerful, and more importantly, expensive servers to the banks on Wall Streets. This worked very well for Sun, and brought in billions of revenues. However, the dotcom implosion, with its subsequent lapse of demand for big power server, along with the rise of cheap x86 servers running Linux and Windows, has taken the glory away from Sun. This itself is a perfect example of how a disruptive technology (x86 Wintel/Lintel), initially serving the lower end of the market, eventually found itself upstream to the high end market served by Sun. From the look of the balance sheet, Sun was caught completely defenseless.

Well, luckily, Sun declined, but hasn't quite set. Here comes the most interesting part of Sun's comeback strategy. Under the leadership of Jonathan Schwartz, whom, by the way, is a terrific evengelical writer, Sun's has a new two-prong strategy: on the low-end, they are embracing the (disruptive) x86-64 AMD opteron systems; and on the "broad-end," they have come out with the market-redefining offering of SunGrid, an on-demand grid solution for computational power, with the promise of "$1/CPU hr." Also, in the software arena, they are now licensing (most, I think) of their software, called the Java Enterprise/Desktop Systems, on a per-employee, annual basis.

Some comments on the Sun Strategy:

• AMD Opteron Systems and Free Solaris: This is a complete reversal of Sun's early stance, and represents a radical departure from their old way of doing business. In contrast to most established companies, which try to retrieve to the even higher end of the market (as described in The Innovator's Dilemma), Sun appears to be fighting the disruptive wave head on, disrupting the disrupter that is Intel with AMD Opterons, and also using the open sourced Solaris to disrupt the disrupter that is Linux.
• SunGrid: The SunGrid is an intriguing offer.
• Java Enterprise System: Licensing model...

Sun's

• Janus and ZFS are both delayed.
• SunGrid appears to not be running.
• Doing all the disruptive offerings in house, instead of creating a separate entity.
• Java Enterprise/Desktop Systems doesn't seem to do well on the balance sheet.

To be continued...