That’s the big question following the publication of the company’s first quarter results. On one hand, the company recorded its fourth consecutive profitable quarter and grew revenue to $3.2bn. On the other hand, revenue growth was just 1%. Can the company turn that into sustained, double-digit growth? As Larry Dignan notes, the financial analysts are split. While Wachovia is skeptical, Citigroup is positive.

From an open source perspective it will be fascinating to see who is right. Sun is an open source experiment in action. Will releasing its software under open source licenses produce the subscription revenue and hardware sales growth it is hoping for? Matt Asay is confident (at least in the long term), while Savio Rodrigues is unconvinced.

My thoughts are that in the long-term the strategy probably will pay off, but it is far too early to be making a judgment call on the success of Sun’s open source play. It takes more than a few quarters for open source downloads to start generating revenue.

The company’s CFO, Michael Lehman, cautioned on the previous earnings call that as Sun begins to break out figures for its software business later this year the move to the subscription model might actually result in decreasing software license revenue.

In the meantime, it’s interesting to see both Asay and Rodrigues discussing what impact an open source acquisition might have on the company’s performance.

“Given the need for near-term growth, it’s unlikely that acquiring an open-source middleware or applications company would do much to help it,” notes Asay, while Rodrigues calculates that it would have to be a significant (i.e. Red Hat-sized acquisition) to even start to make a dent.

“Sun’s revenues are over $3B a quarter (~$14B for the year). Sun would need an additional $300M/quarter of software business to show 10% growth. Even if Sun swallowed Red Hat tomorrow, Red Hat’s ~$500M in revenue would result in 3.4% revenue growth for Sun,” writes Rodrigues.

It doesn’t appear that there is an immediate open source answer to Sun’s dilemma.

UPDATE - Over at Infoworld, Paul Krill has some insight from Larry Singer, formerly vice president of Global Information Systems Strategy at Sun. He thinks Sun has overemphasized open source to the detriment of its revenue:

“‘The hard part is we were spending all of our time and attention inside [Sun] on things that were important from an intellectual standpoint, important from an innovative standpoint [but it was] hard to understand how they were going to drive revenue for the company,’ said Singer,” the article states.

“He added he understood that Sun could lure new customers into buying its systems by extending Solaris via open source. But the return on investment from this effort could take 10 to 12 years, he said. ‘There’s not going to be a company in 10, 12 years unless we get our revenues up in two years,’ he said.”