Time For A Sunset

Speaking of dinosaurs, as I was in my last post, it is time for Sun Microsystems to "explore strategic alternatives." That's MBA-speak for "figure out how to sell the sucker."

Sun's heyday has long since passed. It has no strategy. Developing cool software like Java and giving it away is not a strategy. Doing a 4-for-1 reverse-split of the stock like it did a year ago isn't a strategy. Making most of your sales in high-end servers in an era of commodity servers is not a strategy. Buying other dinosaurs like StorageTek is not a strategy (see my last post about mating dinos). And the list goes on...

The stock market has certainly spoken. A company with a run rate of around $12 billion and a market cap of $4 billion has been rejected by the stock market, the general economic downturn notwithstanding. The breakup value of the company now far exceeds any other hope of maximizing shareholder value.

Sun has for a long time been unfocused, with a penchant for sponsoring all sorts of internal science projects it cannot afford and which contribute to its internal confusion. Scott McNealy was a hoot with his Microsoft-bashing quips, but his low profile as board chair means we don't even have him for entertainment anymore. Besides, he was tilting at the wrong windmill for a workstation-turned-server company. Sun could have had a next act as a Linux platform but it missed that boat.

Time to sail into the sunset.

Portal, Schmortal

My friend Lenny just bought 100 shares of Yahoo. He figures it just may have another bounce left (no dead cat jokes, please). I say don't hold your breath waiting for that.

Lenny asked me to advise Microsoft to renew its offer to buy Yahoo in my blog. So here I am doing my buddy a favor. Sure, Steve Balmer monitors my blog for strategy advice, then jumps on my every suggestion. Ditto my breath-holding comment.

There is no doubt that the Yahoos were lost in an alternate reality when they turned down Microsoft's generous offer. Today, the market values the company at a sliver of what the Softies offered. Must have been fun watching those billions disappear. So, Steve, by all means make another bid. At a small premium over today's valuation. Do it for Lenny.

This reminds me of when AOL sold itself to Time Warner. My take on that at the time was that Case and company had turned play money into real money. We saw how that worked out for Time Warner. So, Steve, maybe you should just buy Lenny's Yahoo shares at a nice premium and I'll let you off the hook about buying the rest of the company.

The problem is that the day of the web portal has long since passed. It was a transitional concept that bridged the pre-web internet era and the web era. AOL was the poster child for that bridge. But the only real need for the bridge was for users who had relied on a portal to organize the pre-web online chaos. Once the web took hold, search became the only organizing tool most folks needed. Like in Google.

Yahoo, like AOL, is a portal dinosaur. It evolved later than AOL, but both are headed for extinction. That has been slowly happening for years now. Extinction of large beasts rarely occurs instantly.

You know all this, Steve. You have your own portal dinosaur, MSN. Mating two dinosaurs will not produce a new super-dino that can dominate the web landscape. You need a completely new organizing principle for your web properties. Portal isn't it.

Sorry, Lenny, but I just couldn't give Steve Balmer bad advice. Think what that would do to my reputation...

Position Your Product For The Recession Now

There is always a complex set of factors that influences purchasing decisions. But in economic downturns, especially those filled with uncertainty, managers everywhere are asked to avoid, defer or reduce costs. Perhaps "asked" is too mild. "Required" would be more accurate. So, regardless of your current value proposition, it is time to rethink how you position your product. The senior question is: "How and for whom can we reduce costs?"

Answer that question and then craft a clear message that makes the case to the target manager who is struggling for survival. Do it now, not next week. Do it before everyone climbs on the cost-cutting bandwagon. Get that message out.

This formula is especially true for B2B tech products. IT managers are already assembling lists of applications they want to get off their servers (or new ones they never want to put on them) so they can cut costs. SaaS offerings are in the sweet spot here. Low switching costs, fast implementation, and usage-based subscription pricing are perfect attributes in this climate.

Point solutions, as opposed to comprehensive enterprise applications, are especially well positioned. Make the case for how you can "snap in" your product in place of the behind-the-firewall solution currently used. Show unambiguously how you reduce costs. This is not the time to pitch soft savings. Meanwhile, assure that your user experience, from ease-of-use to support, reassures the beleaguered IT manager that moving the application to the cloud will make it pretty much disappear from his support menu.

Tech loves disruptive technology. What you want to disrupt right now is customer cost. All else is secondary.

Why Government Must Spend Now

What should a CEO do in the face of the economic meltdown? The conventional wisdom, with which I agree, is cut costs. Cut deeper than you think you have to. Now. Hoard cash. History has rewarded those who have followed this formula, and punished those who have not.

Yet the consequence of this behavior is to assure that the recession is deep and long. As each company makes good defensive decisions and cuts spending, why, sure enough, economic activity slows down even more. Huh! Who would have thought that if we all reduced our spending with other businesses and cut employment, spending with us would decline? Can't we just dish it out without having to take it?

The irony here is that the surest way to reverse the slide is for all companies to spend more, not less. If everyone did that, we'd of course see economic growth, not decline. But that won't happen as each CEO makes the decisions that are in their company's self-interest. Exactly which CEO is going to increase spending for the greater good?

And consumers are behaving just like companies.

So it is not enough for government to act to restore confidence in the rules and regulations that govern economic activity. Nor it is enough to make capital available to lenders. What is needed is sustained spending, because, in the end, it is spending that defines economic activity. Only government can prime the pump with sustained spending when all other players are playing defense.

The surest way to do this is to accelerate infrastructure projects and other investments in our future that directly produce current-term spending. This is not the time for subtlety. The shortest distance between the appropriation and real spending should be the goal.

Yes, this increases deficits, especially as tax revenue slows with the slowing economy. Yes, we should have been smart enough not to run deficits when the economy was growing, so we'd be in a better position to do so now when we need it. But that is crying over spilt milk.

The house is on fire now and only government can put it out before it burns to the ground.