Claire BODEL

Business Negotiation class

Professor Hun-Joon Park
2016/05/02

Case study : Vinod Khosla and Sun

Microsystems (A)
Question n1 Does Vinod Khosla have a real chance at changing Computervisions
decision ? Does Sun have a better product ? Can Sun be regarded as a reliable longterm vendor ?
Sun offers a global standarized workstation which makes it as simple as possible for
an OEM to integrate it into his system. Sun allows users to collaborate from their own
workplaces.
The Sun workstation has been reviewed and acclaimed by the scientific community.
Thanks to a lot of work, Sun succeeded in developing a strong presence in the
university market and the Sun 2 is already scheduled.
Moreover, Sun has technological credibility particularly that the Sun workstation can
appeal to a far wide range of customers.
The universal UNIX operating system provided with the Sun hardware is making Sun
attractive to software developers, and in the UNIX marketplace. Sun holds a huge
potential. The company added value to their product with for example, in tunning
Berkeley UNIX to a higher level.
Besides, flexibility in usage for consumers seems to be a necessity.
Sun needs to gained share in the OEM market in order to be major, long-term goal.
On the other hand, Apollo has developed its own domain network and operating
system, thus they chose not to have standards.
Everything seems to be scheduled, to be going like clockwork within Apollo company,
according to Datamation.
Since Computervision aimed for a wide range of domestic and international
customers, dealing with the Sun standards would be more efficient for the firm
strategy.
In term of money, dealing with Sun for the OEM market can be more profitable for
Computervision because Suns goal is not mainly focus on revenues/money but on
market share.
Therefore, the gross margin after a negociation should be higher for Computervision
if they work with Sun.
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Suns popularity increases, as a result, recruting good engineers will not be a major
concern for the company and a plan of imminent staff expansion can be scheduled.

Question n2 How shoud Vinod Khosla respond to Computervisions president ?

What should his long-term and short-term objectives be ? Specifically, what should
he offer to Computervision ?
Suns technology is already reconized. After making a reputation as a designer of
high-powered workstation computers and servers, Sun should expand its talents.
Khosla had been a founder of Daisy systems, an integrated vendor of CAE systems.
For him, working within this overall business is not recent.
A kind of synergy could be built with Computervision and Sun.
Thus Computervision does a lot of research and development since the company
had build there own workstation previously, (this is a key point for a long-term
agreement), in contrast with Sun which does not have any money to spend at the
beginning, not like most start-ups. However Sun has the technology.
So far, dealing with Apollo must be an error. Even though Apollo has experience in
the OEM market, holding the second tier after the top three, the company chose not
to have standards and for Computervision which wanted to aim for a wide range of
domestic and international customers it can be problematic and costly to adapt their
products depending on the market which Computervision operates.
Sun s mission is to maintain lead best cost/performance product on the OEM
market. That is why Sun workstation breaks barriers with a hardware price of $5000
to $7000 in OEM quantities with a possible collective bargaining between both
companies if they decided to collaborate. Computervision will be able to sell
workstations at an end-user price of $10000 to $15000. Sun entered the market
quickly with a low-priced machine. Contrary to Apollo with a retail price of $25000 per
workstation. Thereby, Computervision will make more profit with Suns product since
it is more affordable.
Futhermore, Apollo works with a lot of Computervisions competitors and it will be
wise to align their practices to competition.
The only important thing that Sun is missing is the well-connected senior
management that Apollo has. Sun was in trouble with a lack of money at the
beginning. With more capital, Sun can be the leading company for workstations.
Moreover, as a win-win situation, Sun would be able to bring the well-known standard
technology and Computervision assists Sun in marketing and sales.
If Sun obtains the necessary financing, the company will be able to increase his
manufacturing capacity.
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Sun has just begun a reputation within the market of workstations.

They have been able to do $8 million of business in the first year of full operations.
Sun has 50 man-years of software invested in it, and Sun 2 and 3 are already
scheduled and the price of each future products decreases compared with the first
one (Sun 1). Therefore, the average price for the Sun 2 is $5000 and $4000 for the
Sun 3. Computervision wil get a lot of profit making an agreement with Sun.
Cost reductions/ options are going to be develop as market requires. OEM can
benefit from this marketing approach.
At last but not least, since students from univerties will be more familiar to work with
Sun technology, they will certainly prefer to buy the technology they used to be
intimate with : the Sun technology. Computervison needs to think about the future
and believe that this student market could be huge when students will work in
companies.

Question n3 What are the consequences of not doing this deal ?

A deal between Apollo and Computervision is not recommanded. If both companies
signed an agreement, Sun will have to review his business plan because The OEM
market is one of the most important step for the Suns company. Indeed, Sun will
have to focus on specific niches and compete with a dozens of start-up companies
with cheap workstation-based systems.
That is why Sun should stepping up its efforts to win the deal against Apollo.
Not doing this deal also means that Computervision could not offer its new customers
the lastest technology, because competitors like Apollo will have to support
established clients and then scrap their outdated computer systems.