Sun Deals for Handy Andy

Sun Microsystems Inc. (Nasdaq: SUNW) has rehired its first employee, Andreas "Andy" Bechtolsheim, and plans to buy a stealthy startup he's heading up (see Sun to Acquire Kealia).

The news furthers Sun's efforts to regain some of the luster it's lost in the downturn, in part by returning to its roots as a technology innovator.

During Sun's quarterly product launch yesterday, CEO Scott McNealy gleefully presented Bechtolsheim as the latest addition to the executive staff, while reminiscing about their long acquaintance. After meeting McNealy at Stanford, Bechtolsheim, a designer of single-board workstations, became employee number one at Sun, which was founded in 1982. He was VP of technology there through 1995, when he left to found Granite Systems, which was sold to Cisco Systems Inc. (Nasdaq: CSCO) and became part of that company's gigabit switching unit.

For the last several months, Bechtolsheim's been heading up Kealia Inc., which Sun will buy in a "stock-for-stock merger," terms undisclosed, by the end of next quarter (see Sun to Acquire Kealia). Kealia's employee count includes 58 engineers, Bechtolsheim says. A spokeswoman for Sun says there are no immediate plans to move these employees out of their current digs in Kealia's Palo Alto, Calif., office into the Sun campus.

Kealia's been working on high-performance servers, thought to be aimed at the digital video market. Its existence, and Bechtolsheim's involvement in it, was first reported by our sister publication Light Reading back in October 2003 (see Is Cisco Tuning Into Video? and Kealia Project Raises Questions). Since Bechtolsheim was employed by Cisco at the time, it seemed possible that company could have been involved.Not so, Cisco says today. "Cisco has no investment in Kealia nor any business arrangement with the company," says spokesman John Noh.

Bechtolsheim says Kealia's servers sport improvements in "CPUs, I/O, memory, and packaging." He hinted that the company, as part of Sun, will focus on building these technologies around all Sun chips, including UltraSPARC and the Opteron chips from Advanced Micro Devices (NYSE: AMD), with which Sun has a special agreement. New designs will run under Solaris, Linux, and even Windows, Bechtolsheim said. McNealy jokingly countered that Sun would certify its gear to run under Windows, but wouldn't otherwise support it.

Bechtolsheim will become senior VP and chief architect of Sun's Volume Systems Products group, which makes a range of small, workhorse servers designed for large data centers, Web hosting facilities, database applications, grid computing, and the like. Examples include the Sun Fire B200x Blade Server, the Sun Fire V20z Server, the Netra 240 Server, and the SX200 board.

Volume Systems is the same group that's working to absorb Sun's purchase in January of Nauticus, which makes a content switch with a range of security, load-balancing, and virtualization functions. In his own presentation just before McNealy's announceemnt, Neil Knox, executive VP of Volume Systems and Bechtolsheim's new boss, said his division is working to put networking functions from Nauticus directly into the high-performance servers it's designing.

"We're putting the network functionality within the volume server," Knox said.Now it looks as if Kealia's technologies will be included in that equation. McNealy says he expects Knox and Bechtolsheim to become "one of the great design and execution teams in the history of the computer industry."

High expectations. But if they prove out even in part, Sun could get a boost not just in its server sales, but also in its networking and storage revenues, which depend heavily on follow-on adoption by server buyers as part of integrated solutions (see Sun VP: Our Storage Is Undervalued). Sun could use the help particularly in storage, where its market perception has suffered (see Dot Hill's Alive & Well).

At least one analyst thinks the arrival of Bechtolsheim and Kealia are good news for Sun, though maybe not as good as McNealy puts out. "Bechtolsheim is a reminder that Sun's comeback will largely be based on technology," writes Laura Conigliaro and colleague David Bailey from Goldman Sachs & Co. in a note to investors today. But the firm stresses that, while Sun may see improving results from new technical innovations, there's a chance it may never return to "a position of serious influence in the industry again."

At press time, shares of Sun were trading at $5.74, up $0.20 (3.61%).

Figure 1: Andy Bechtolsheim, SVP and Chief Architect,
Volume Systems Products Group, Sun Microsystems Inc.

Mary Jander, Site Editor, Byte and Switch