By Rob Landley (TMF Oak)

I admit that Sun Microsystems (Nasdaq: SUNW) is in an enviable position, and its stock is priced accordingly. But the question here is the future, not the present. My bearishness toward Sun isn't any forecast of impending doom, merely skepticism that its future growth can continue like the past now that its environment has become far more competitive, and its fat margins form an inviting target for competitors to undercut.

I'm also concerned about the large collection of missteps the company has made. Rather than simply state that Sun's handling of Java has not exactly been the optimal way to drum up third-party support, I think I'll just provide a few links: 1) As its power rises, Sun coming around to Microsoft's style; 2) Sun withdraws Java from standards process.

If you don't believe there's tension between Sun and Java developers, check out the "related links" on this article: Java: Can Sun Control the Flood?

Of course, IBM's support for Linux makes headlines on a daily basis, and they've stated time and again that they're specifically targeting Sun with it. Here's a couple of articles from earlier this week: 1) IBM pushes the Linux envelope; 2) IBM to offer support for Linux Superclusters.

Or you could simply check out IBM's own page on the subject.

IBM has been unwilling to be follow Sun on Java licensing issues, either: Sun, IBM square off in license spat.

Not that Sun seems entirely clear how it plans to make money off of Java.

And, of course, there's always my "techie beef."

But Java isn't Sun's core business, despite the hype. Sun makes the majority of its money selling UltraSparc workstations running Solaris. The hardware side is under attack from new 64-bit chips from Intel and AMD, as well as a revitalized Alpha and IBM's own hardware platforms. On the software side, Linux is simply gutting Solaris.

Sun has a lot of work to do to simply to stay abreast of the rapid advances its competitors are making. It's pitting proprietary hardware and proprietary software against commodities on both fronts, and that's not a battle that's ever easy to win.

To use a term from The Innovator's Dilemma by Clayton M. Christensen, Sun seems to be a company performing an "upward retreat" into a niche market. This sort of thing is a highly profitable run, with an abrupt end. There's an obvious way out, but IBM took many painful years to transition to a service-based business model. That transformation is part of why Sun places so much of its hopes on Java, but all I've seen come from Sun on that front so far is talk.

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