*************************************************************************** ANALYSIS OF SUN ANNOUNCEMENT APRIL 21, 1993 *************************************************************************** FOR HP INTERNAL USE ONLY Table of contents: I. What was announced II. Comments on the announcement/Consultants quotes III. Sun Product Family Update IV. HP vs Sun comparison V. Workstations and Multiprocessing VI. Sun Q3 Earnings: Profits are Down I. WHAT WAS ANNOUNCED a. New Products - SPARCstation 10:30LC - SPARCstation/server 10:40 - SPARCstation/server 10:402 - SPARCstation/server 10:51 - SPARCstation/server 10:512 b. New Pricing - SPARCstation 10:41 - 18% reduction - SPARCstation 10:512 - 16% reduction - SPARCstation 10:54 - 21% reduction All SPARCservers by up to 25% c. Multiprocessing Software Development tools (SunPro) - Parallelizing Fortran Compiler - MP Debugger - MP compatible language libraries d. One year warranty on SPARCstation 10 family TARGET MARKETS for this announcement: EDA, MCAD, SW Development, Econometric Analysis, Color Publishing II. COMMENTS ON THIS ANNOUNCEMENT/CONSULTANTS QUOTES Sun is on the defensive! Look what's happening here: - Profitability is down, Q3 results show........... - Customers in the technical market want performance and all Sun can do is lower prices, SPARC still doesn't have it - They just announced new performance levels that still don't come close to HP, so they hype multiprocessing and change the rules for measuring performance - They are trying to be the first in the multiprocessor desktop market, and it's costing them. They are pioneering and HP will benefit from it. - They are taking their installed base through an OS migration. This is a corporate drain and their base is still dissatisfied. - Their product planning is reactive, they are dropping systems announced just a few month ago (SS10:20), plus renaming and repositioning current systems (SS10:30 and 52) to make up for the lack of performance. - They have a gaping hole in their product line between the $8000 to $15,000 price point. HP 715/33 and 715/50 hold the lead! - Even with their repricing, HP 715/50 is still less than the SS10:30, 10:40, 10:41 QUOTES FROM DATAQUEST: "Sun Improves performance on SPARCstation 10 - but it's not enough" "Having felt the increased competitive pressure from Hewlett-Packard, Sun has updated it's SPARCstation 10 family..." "Without leading-edge performance, and in the midst of an operating system transition, Sun is in a precarious position...Our surveys indicate that only about 50% of Sun's customers were planning to purchase Sun products again, compared with almost 75% for HP." "Based on our end-user surveys, performance is still a driving factor in the [workstation] purchase decision, and Sun does not have perfor- mance leadership." III. SUN PRODUCT FAMILY UPDATE ----------------------------------------------------------------------- SPARCstation Product Family UPDATE ( * marks announcement news) ----------------------------------------------------------------------- Model Intro Date Status ----------------------------------------------------------------------- SPARC ELC 7/91 Dead as of 3/93 SPARC IPC 7/90 Dead as of 3/93 SPARC IPX 7/91 Dead, not part of Sun's product family picture SPARCstation 2 11/90 Dead as of 3/93 SPARCstation 10:20 12/92 Dead, not part of Sun's product family picture SPARCstation 10:30 5/92 Dead, not part of Sun's product family picture NEW! SPARCstation 10:30LC 4/93 * New config and renaming of the 10:30 with a lower price. TI has stopped producing the chip (36Mhz) for this box. Could mean limited quantities or over supply if this news cannabalizes their sales NEW! SPARCstation 10:40 4/93 * New, same as 10:41 w/out super cache, $2k less to hit under $20k price point NEW! SPARCstation 10:402 4/93 * New, 10:40 with 2 processors SPARCstation 10:41 5/92 Just started shipping in March which is 10 months after intro. * Price reduction of 18% NEW! SPARCstation 10:51 4/93 * New, Sun's highest performing uni-processor, low price June availability NEW! SPARCstation 10:512 4/93 * New, 10:51 with 2 processors Was the 10:52 and price has been reduced 16%. June availability SPARCstation 10:54 5/92 * Price reduction of up to 21% Volume shipping Q3 CY93 IV. HP vs SUN COMPARISONS FEATURE Sun SS10:30LC HP 715/50 ----------------------------------------------------------------------- Packaging Desktop Desktop Processor SuperSPARC PA 7100 Clock speed 36Mhz 50Mhz SPECint92 45.2 36.5 SPECfp92 54.0 72.1 Memory Capacity 32-512MB 16-256MB Disk Capacity 424MB-41GB 525MB-68GB Graphics Accel. Color (GX) GRX,CRX,CRX24,CRX24Z,CRX48Z Slots 4 1 Cache 36KB (int) 256x256 OS included Solaris 1.1 HP-UX 9.0 Solaris 2.1 Audio 16 bit 16 bit Base Config 32MB 32MB 16" color 19" color 424MB disk 525MB disk ISDN List Price $15,995 $15,490 Trade-in credit NONE - program 10-30% discount expired 3/31/93 depends on trade-in type and quantities HP (+ positives, - negatives) + PRICE!! HP is lower to begin with and TradeUp'93 can lower the price substantially + Floating point performance + 19" color, Sun offer 16" for that price + Upgradeable to next generation of the 715 - Integer performance is lower - ISDN extra Sun (+ positives, - negatives) + Upgrade path to 10:41 and MP in the future + ISDN included - No more 36Mhz chips being made, dead end product - No more trade-in program to the 10:30 FEATURE Sun SS10:40 HP 715/50 ----------------------------------------------------------------------- Packaging Desktop Desktop Processor SuperSPARC PA 7100 Clock speed 40Mhz 50Mhz SPECint92 50.2 36.5 SPECfp92 60.2 72.1 Memory Capacity 32-512MB 16-256MB Disk Capacity 1GB-41GB 525MB-68GB Graphics GX,GXplus,GS,GT GRX,CRX,CRX24,CRX24Z,CRX48Z Grey Slots 4 1 Cache 36KB (int) 256x256 OS included Solaris 1.1 HP-UX 9.0 Solaris 2.1 Audio 16 bit 16 bit Base Config 32MB 32MB 16" color 19" color 1GB disk 1GB disk ISDN List Price $19,745 $17,490 Trade-in credit NONE 10-30% discount depends on trade-in type and quantities HP (+ positives, - negatives) + PRICE!! HP is lower to begin with and TradeUp'93 can lower the price substantially + Floating point performance + 19" color, Sun offer 16" for that price + Upgradeable to next generation of the 715 - Integer performance is lower - ISDN extra Sun (+ positives, - negatives) + Upgrade path to 10:402 (MP ready) + ISDN included - PRICE is still higher than HP - Only a 16" monitor FEATURE Sun SS10:51 HP 735 ----------------------------------------------------------------------- Packaging Desktop Desktop Processor SuperSPARC PA 7100 Clock speed 50Mhz 99Mhz SPECint92 65.2 80.0 SPECfp92 83.0 150.6 Memory Capacity 64-512MB 32-400MB Disk Capacity 1GB-41GB 525MB-126GB Graphics GX,GXplus,GS,GT GRX,CRX,CRX24,CRX24Z,CRX48Z Grey Slots 4 1 Cache 36KB (int) 256x256 1MB (ext) OS included Solaris 1.1 HP-UX 9.0 Solaris 2.1 Audio 16 bit 16 bit Base Config 64MB 64MB 16" color 19" CRX 1GB disk 1GB disk ISDN List Price $26,745 $42,940 Trade-in credit NONE 10-30% discount depends on trade-in type and quantities HP (+ positives, - negatives) + PERFORMANCE! WE still offer the best! + 19" CRX, Sun offer 16" for that price - ISDN extra - Price Sun (+ positives, - negatives) + Upgrade path to 10:512 (MP ready) + ISDN included + Price - Performance - this is their top of the line! - Only a 16" monitor REPRICING COMPARISONS ----------------------------------------------------------- CONFIG Sun SS10:41 HP 715/50 ----------------------------------------------------------- 32MB $21,745 $17,490 16" color 1GB disk ISDN ----------------------------------------------------------- CONFIG Sun SS10:512 Sun SS10:54 HP 735 ----------------------------------------------------------- 64MB $33,745 $45,745 $42,940 19" color 1GB disk ISDN V. WORKSTATIONS AND MULTIPROCESSING Sun is aggressively moving into the multiprocessing arena and they need to. The SPARC architecture has not delivered the famous Bill Joy promise of 2X the performance every 18 months. Therefore they are adding processors. HP believes that multiprocessing is a very valuable technology provided the necessary applications are targeted for MP, OR the customer requires strong OLTP performance, OR wants to deploy a multi-user environment. That's why HP began shipping production quality SMP systems several years ago in its Series 800 systems, which hold the record for UNIX OLTP performance. These systems are used in multi-user environments with application support today. Sun still isn't shipping SMP. Sun is fighting the pioneering battles of being first to deliver MP in the desktop/client market because they don't have a choice. It's uniprocessor is out of gas, and this announcement is further proof of this fact. HP has MP expertise today, but providing it on the desktop in the technical market without applications would be useless. Therefore you will see MP workstations from HP in the future as the application story builds, and as complier technology develops to automatically compile source code for an SMP environment. HP, as witnessed in its commitment to open standards, the design of its product line, and the success of the Open Migration Program, are committed to supplying solutions that enhance and maintain customers production environments. HP believes that fast uniprocessors, AND fast SMP, AND fast MPP devices all have their place, and HP is best positioned to deliver on all of these computing models when ready and with applications that solve real problems. Today, technical applications are written to optimize uniprocessor performance and HP has outstanding uniprocessor performance. VI. SUN Q3 EARNINGS: Profitability Down Sun reported revenues of $1.141 billion, up 20 percent from the $952 million reported for the corresponding period of fiscal 1992. Net income for the third quarter was $51.7 million, or 47 cents per share, compared to $61.4 million, or 60 cents per share, for the like period a year ago. For the first nine months of fiscal 1993, Sun recorded revenues of $3.048 billion, up 17 percent from the like period a year earlier. But net income for the nine-month period was $80.6 million, or 77 cents per share, compared to $135.6 million, or 1.34 per share, reported in the corresponding period a year ago. The company shipped over 90,000 SPARC processors during the quarter, 57,000 were systems and the remaining upgrades and multiprocessors, and distributed 136,000 Solaris and UNIX licenses, 116,000 were Solaris 2. "Profitability was below the year-ago level due to gross margin declines that were partially offset by tightly controlled growth in operating expenses," said Sun's Chief Financial Officer Kevin Melia. "The gross margin percentage declined from the prior-year quarter due to a heavier mix of upgrade shipments, as well as increased shipments of non-system components such as memory and storage. We also experienced weakness in several European countries."