Restructuring / Turnaround Strategies Case Study

SUN in 2006: Changing Business Model

Abstract:

Sun Microsystems (Sun), a US based leading computer company followed a vertically integrated business model wherein it provided the entire range of hardware and software requirements including computer chips, computers, operating system and programming language. Sun also put a strong emphasis on Research and Development (R&D). The business model had enabled Sun to maintain its lead in innovation and deliver many technological breakthroughs over the years.

But since 2002, Sun had recorded losses for four consecutive years. To turn the company around, Scott McNealy (McNealy), CEO of Sun, had launched several initiatives, but the situation continued to worsen. In 2005, Sun’s losses amounted to $10.7 million on revenues of $11 billion.

The case discusses the relevance of Sun’s business model in changing face of the computer industry in the US.

Pedagogical Objectives:

• To discuss the present/existing business model of Sun
• To compare the business models of the other leading US computer companies with that of Sun
• To discuss the relevance of Sun’s business model in the changing face of the computer industry in the US
• To discuss the pros and cons of the initiatives adopted by Sun to bring about a change in its business model.

Keywords : Sun Microsystems; Software(IT) industry; Restructuring / Turnaround Strategies Case Study; Vertical business model; Strong R&D emphasis; competitors viz. Dell; IBM; Intel; Microsoft; Competitors’ strategies and business models; Sun’s earlier strategies; Sun’s decline; Razor and Blades(R&B) revival strategy launched by Sun CEO Scot McNealy; Effects of R&B strategy; CEO change at Sun in 2006