The Rise and Fall of Sun Microsystems, Inc.

Until 2010 Sun Microsystems Inc. was a major maker of computer hardware, software, and product services. The company was informally started in 1981 when a Stanford graduate student named Andreas Bechtolsheim was working on a computer project to build what would become known as a workstation since it combined the ability to serve individual users like a PC, but with the power of much larger computers. Other benefits of workstations included expanded networking capabilities and high-resolution graphics.

Within a year, Bechtolsheim’s work had attracted the attention of two Stanford MBA graduate students, Vinad Khosia and Scott McNealy, both of whom had computer industry experience. A fourth member of the team, Bill Joy, a Berkeley Ph.D., is considered a co-founder although he would join the company later.

Early Successes

From the beginning of the company’s history, much of its success was attributed to Bechtolsheim’s shunning of proprietary hardware and software. Instead, UNIX was their choice, since it was already in wide use among a variety of hardware platforms as well as in different fields.

Between 1985 and 1989 Sun was the fastest-growing company in the United States. The company’s compounded annual growth rate was 145 percent. Further, in less than six years Sun had achieved $ 1 billion in annual sales.

Sun’s Phenomenal Growth

The company soon moved from its original location in Santa Clara to a larger facility in Mountain View, where McNealy engineered the company’s further growth. But instead of following the lead of other companies by forming relationships with Microsoft and its focus on PCs, McNealy focused on what he saw at the future of networking.

Unfortunately, a large reason for the phenomenal growth of Sun could be attributed to the bubble that would soon lead to the dotcom burst. As more and more of these start-ups purchased Sun workstations as their computing base, Sun’s profits skyrocketed. Further, the company’s stock prices rose dramatically. All of this money led to a building and hiring frenzy which, unfortunately, was based on anticipation of continuing growth. In 2000 the bubble started to burst as web start-ups started to fail and ended up selling their workstations, causing Sun’s sales and stock prices to free-fall.

The Dotcom Bubble Bursts

The aftermath of the dotcom burst found Sun refocusing on improvements in processing, going so far as to cancel several major projects in the effort. The projects stemming from this effort led to improved profits as well as new investments by firms such as Kohlberg Kravis Roberts, which added $ 700 million to the company coffers.

Despite growing revenues and development of new products such as the revolutionary Java software, which was quickly embraced by many industries, it was all too little too late. Sales to large corporate clients fell and the company began laying off employees. Even leading executives started to leave.

Sun Finds an Exit

In 2009 Sun announced that it had been acquired by Oracle Corporation. But delays in approval of the merger caused another round of layoffs until early 2010 when the merger was finalized.

Sun’s sprawling Mountain View campus, with its 1,000,000 square foot building and central courtyard which many dubbed “Sun Quentin”, was finally sold to Facebook to be its headquarters.

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