Sun shines again after anniversary sale flap

Manufacturer quickly redresses resellers' complaints

Illustration by Geopal

Sun Microsystems' decision to exclude resellers from an anniversary sale last month caused a minor firestorm, but the company's rapid response seems to have quelled the upheaval.

Rick Wilking

Sun Microsystems Inc.'s decision to exclude resellers from an anniversary sale last month caused a minor firestorm. But the company's rapid response to complaints stopped many Sun partners from ringing up "no sale."

Under the original terms of the promotion, which ran from April 23 through May 7, Sun slashed prices on selected servers, storage and software products ? some sold at a 65 percent discount ? but only for customers who ordered directly from Sun via its Web site. Resellers, shut out of the promotion, couldn't match the discounted prices and complained to Sun's Santa Clara, Calif., headquarters and in online forums, including blogs.

Almost immediately, Sun altered the terms to give resellers a 10 percent rebate when they registered sales they had generated but which ended up being handled by the online store. Customers also could indicate which resellers they normally worked with so Sun could credit and compensate them. Sun also allowed resellers with deals in the works that met the sale criteria to register the deals themselves for credit.

"Frankly, I've been here 18 years, and we acted on it as quickly as I've ever seen us act on anything as a company," said Michael Walsh, director of U.S. partner communications at Sun. "We realized that [the sale] was not constructed properly in the first place and we rectified it very quickly." The original intent, he said, was to bring in new customers and create leads for the resellers.

"The mistake was bad, but I think they handled the fix well," said Christina Richmond, research manager for channels and alliances at market research firm IDC Inc. "They could have just stuck their heads in the sand, and it would have been a debacle."

Had Sun not quickly changed the terms of the sale, she added, Sun could have seen an exodus of resellers.

In addition to tuning their ears to the cacophony of complaints, Sun executives probably also had their eyes on Wall Street. Sun stock, which was trading at about $5.90 a share for much of April, fell to $5.25 as news of the flap became known.
Richmond said that when a company is reliant on its resellers, it must play fair with them.

"You've got to give them significant ways to make revenue because otherwise they start looking for other ways to keep their business afloat," she said.

Because most resellers sell competing product lines, they would have little difficulty forsaking one brand in favor of another.

"If they didn't have a committed channel, they simply would have gone to the B vendor and the C vendor on their list," she said of Sun's resellers. "So I commend Sun for turning it around."

Sun spent a good deal of time conferring with its channel partners, who were understandably irate, she said. "That's huge ? to show that kind of turnaround, nimbleness and commitment to the channel after a big 'oops' like that I think is a real statement."

Several Sun resellers echoed that point. Alan Bechara, president of PCMallGov, acknowledged the loss of several large sales within the first few days of the promotion. "Quite frankly, I am encouraged by their reaction," he said.

"We appreciate Sun's continued commitment in support of key channel partners like GTSI and the speed with which they took action to address this," said Steve Krauss, director of enterprise computing solutions at GTSI Corp., a major Sun government reseller.

Sun quickly issued a statement saying it regretted "that this promotion was not more fully inclusive of our partner community," adding that the company "underestimated the extent to which promotional pricing could overlap with proposals in process either through our partners and our direct sales force, and [we] believe this solution quickly addresses the issue."

Because government and education resellers have to adhere to strict purchasing regulations, they were offered an alternative way to participate in the sale, Walsh said. Sun allowed them to use the anniversary prices to sell to their government, universities and other institutional clients in lieu of a rebate.

Bechara called the promotion an ill-advised attempt to mark the company's 25th anniversary and beat the competition with bargain-basement prices.

He said he'd like to think Sun's action will create increased brand awareness and attract new business. "If that's going to help my business long-term, and they don't do this kind of stuff again without making sure we're included in it," he said, "then I think there's some good that'll come out of this because Sun has designed excellent products, superior products in many cases, and they've been the best-kept secret in the world."

But he warned that large promotional discounts have other consequences. "If I'm a customer out there, whether government or commercial, I'm thinking, 'If Sun is running this promo and can afford to give me this much off, maybe I'll wait a little longer and it will become a permanent price.'"

Associate editor David Hubler can be reached at dhubler@ 1105govinfo.com.

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