Intelligence for growth

Is that stalling that part of your business?
In the US that is stalling. But in China and India there is rampant expansion. They are suffering from overcapacity and investments from the late '90s. That's why the rule of thumb is that the communications sector will improve after the computing sector.

Is Sun Microsystems still viable?
Scott (McNealy) has a parallel on the desktop, and that is Apple. They are sophisticated software companies who are wed to hardware revenues and margins. And they are both wed to proprietary hardware. The question is, what is the business model that you can carry over that is successful? Apple's model has been they're increasingly happy with 2 percent of the marketplace, and they are happy to cede the other 98 percent of the marketplace to other people.

I don't know if Scott is on that same track or not. He has had 10 quarters of decreasing revenues. He is increasingly facing competition from Itanium and the more standard building blocks, and at the high end from big-iron companies. So he has to decide whether he is going to be a closed-source, proprietary-limited player, as Apple has decided to do, or he is going to do something different. He is at least using Intel architecture at the bottom of the scale. Customers want Solaris on cost-effective building blocks. We have tried to win designs at Sun, as we do at Apple all of the time. I don't have any unique advice for these guys.

Is Sun still a valuable partner, and will that relationship grow in the future?
I'm biased in this area. I think that SPARC is not a long-term player in this area. To be a long-term player, (McNealy) will have to start to accept product margins that make [Sun's] price/performance more attractive. We compete enough with them in the big-iron area to know what the price/performance advantage of our architecture is, and that's why he is losing. He will either take a huge margin hit, or he needs to do something different. But he has a lot of cash, and if his board supports him, he can continue to move at the speed he has been moving.

Will Intel ever be able to crack Apple?
We keep trying, but frankly it gets less and less interesting each year. When they were 10 percent of the market it was a more interesting issue. But at 2 percent of the market...our sales can blip 2 percent quarter on quarter, so we can shrink or grow by a couple of Apples. There are lots of interesting aspects in there. Steve (Jobs) is trying to appeal more to the Intel base. You might ask why he doesn't take his OS and try to compete in the other 98 percent of the market. But he doesn't choose to do that.

The OS X kernel runs just fine on Intel. Just a matter of the app stack to stick on top of that. But you'll have to talk to Steve about that. We just try to get design wins with these guys.