Will Sun Rise Again?

The trouble is, McNealy must invest heavily in N1 just to stay in step with competitors. IBM and HP are hard at work on very similar systems. On Oct. 30, IBM CEO Samuel J. Palmisano told customers that he was betting the future of his company on a vast, N1-type project called "on-demand computing." He's investing billions to develop new products and will spend $800 million on the marketing. And although HP CEO Carleton S. Fiorina keeps it quiet, HP's version of N1, called Utility Data Center, already has 450 engineers behind it and 10 customers in pilot projects.

With all these challenges, it might make sense for McNealy to shelve his ongoing war with Microsoft. But he has trouble letting it rest. Since May, he's been offering a low-cost office-applications package to battle Microsoft's ubiquitous Office desktop suite. This is David taking on Goliath without the slingshot. McNealy's colleagues urge him to focus on more pressing threats. Before a Sept. 18 speech to Sun customers at San Francisco's Moscone Center, his vice-president for software, Jonathan Schwartz, bet his boss $2 that he couldn't avoid mentioning Microsoft during his speech. McNealy took the bet--and collected his money after his talk.

At the event, Sun's first big customer conference in seven years, dreadlocked drummers on stage were pounding a beat when McNealy jumped up, beating on a drum of his own. He promptly launched into a 45-minute stump speech defending Sun, one of the last of the integrated computer makers. "There is no automobile-integration industry," he says. "You get a car fully assembled. They even wash it for you." Jokes and debating points aside, McNealy has to get Sun making money again. Only then will he convince the world that Sun can shine anew.

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