Merrill lynch’s Steven Milunovich seen dabbling in hubris this morning, as he puts out a scathing “open letter” to Sun’s CEO Scott McNeely.

Its always dicey when one attempts to fathom what is motivating someone else. I have no idea what is behind this stock analyst’s thought process — is he looking for buzz, for banking business, sucking up to another firm? Is he genuinely interested in saving Sun? I have no idea.

Note that Steven Milunovich’s title at Merrill Lynch is “Global Technology Strategist,” so his area of coverage is pretty broad. Still, it seems rather odd for an analyst to be calling for a wholesale makeover of a company, including layoffs of 20%.

Forbes observed:

“Milunovich believes that Sun’s software strategy, particularly its aggressive pricing, could be disruptive to Microsoft and IBM but that the company “faces an uphill battle with its against-the-grain strategy of Solaris on Intel and Linux on the desktop.”

Read it and judge for yourself.

Sources:

Download pdf file “Dear Scott McNealy” (Merril Lynch, Sun Microsytems)

Does Scott McNealy’s Magic Still Work?
Lisa DiCarlo, 09.30.03, 1:15 PM ET

http://www.forbes.com/home/2003/09/30/cx_ld_0930sun.html

Steven Milunovich, Merrill Lynch Global Technology Strategist http://askmerrill.ml.com/res_article/0,,18692,00.html

UPDATE: 10/3/03 6:29 am
Here are some additional stories since yesterday

Guardian: Analyst goes public on Sun’s failings

Bloomberg News: Analyst pushes overhaul of Sun Microsystems

WSJ: Analyst Urges Job Cuts, New Focus for Sun Micro

Reuters: Sun Micro CEO given options for 1 million shares

Category: Current Affairs, Finance, Web/Tech

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3 Responses to “Analyst Activism, Anyone?”

  1. The Merrill link didn’t go to the Milunovich report, so it’s hard to know exactly what he said about Sun. However, I can suggest this. Sun Microsystems has two big problems. First, it’s core market of risk-taking, leading-edge developers and innovators has been hit hard in the dot-com implosion. Second, the senior executive defections are extremely important. Executives like Ed Zander and Bill Joy are Hall-of-Fame talent. Without people of their caliber surrounding him, McNealy won’t look as good as CEO.

    That said, Sun can survive going forward as an innovative IT solutions company. There are still plenty of problems to be solved. It won’t be easy though. Transitions never are.

    Stewart Noyce

  2. I fixed the link — it now takes you to a PDF of Milunovich’s open letter to McNealy / analyst report on Sun.

  3. According to an old article on “The Street”, Mr. Milunovich “focuses on enterprise hardware and storage”
    Report Card: Steven Milunovich
    http://www.thestreet.com/markets/analystrankings/1059315.html

    So if he started getting into “software” it was only recently.

    Also, this is not the time I hear of so-called “independent analysts” wanting to see Sun spin off Java. Most of the times I read these type of claims, it was from people with a “windows eveywhere” view of the software world, or a direct relation with Redmondia.

    Yes, the type of folks that would prefer to see Java going away.

    He even acknowledges that “Java is a technological success”, but couldn’t contain his spin and added “a so-so branding effort” (is he aware of recent branding awareness efforts, like Java.com? Palm Inc. including Java in their PDAs, and the succes of Java in phones?).

    And he delivers his final anti-java blow: “…and a financial failure”.

    What figures does Milunovich have? Where is his “proof” for such a claim?

    What is the “cost” of Java?. How many Solaris hardware systems are sold to run Java (J2SE or J2EE) software? How much more viable is the use of a non-windows platform with the availability of a cross-platform development and runtime environment like Java, compared to a scenario without Java and with high software porting costs?

    I’m outraged. I think Merrill Lynch should de-emphasize and spin-off Steven Milunovich. If he thinks he is so much better than Scott McNealy, why doesn’t he create his own software company and run it as he pleases?

    This is the problem with stock analysts that think they have the power or insight to run a company. No long-term software strategy (and Java is clearly a technology that will have a LONG TERM impact in an industry that until recently couldn’t care less about code and runtime portability of the software) can survive a stock analyst.

    “Profits now!” is not the foundation on top of which you build any long-term succesful business, much less technology.

    Had Steven Milunovich advised Sony on the cd player, Sony would have de-emphasized it, spun-off, and shredded the technology because it was “a technological success but a financial failure”.

    Here’s my open letter to Merrill Lynch: please cut your staff by one, spin-off, or de-emphasize Steven Milunovich.