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Reading the Deal: Sun Lands on China's Desktop

A deal making Sun Microsystems' new Java Desktop System the de facto standard in China is a good first step in the company's bid to dethrone Microsoft's Windows, but challenges abound, analysts said.

China Standard Software Co. (CSSC), a consortium of government-backed technology companies, said this week it will use Sun's Java Desktop System as the foundation for a national desktop software rollout.

China plans to install at least 200 million copies of an open-standards-based desktop systems, starting with 500,000 to 1 million seats per year. Sun's desktop software costs $100 per employee in the United States.

For Sun, which has been battered by profitability concerns, the win in the world's most populous nation could be a big one.

But, analysts aren't writing Windows' obituary just yet. During a recent forecast panel of desktop systems, analyst Rob Enderle told internetnews.com the consensus was less than flattering.

"Given my panel here [which included representatives from Microsoft, Oracle, Apache, and Yankee Group] agreed that Sun would not likely be around in 10 years, this is an interesting counterpoint," Enderle said. "China is a very hard sell and the general belief was that either IBM or HP was going to get this business. Sun, apparently, pulled out all the stops and scored a significant win. The belief is that this deal has negative margins associated with it."

However, Enderle said the China deal coupled with the AMD deal announced earlier this week indicates a more aggressive strategy. Sun said it would use AMD Opteron processors in some Sun Fire machines.

"And Sun does need to execute such a strategy if they want to avoid being trivialized out of the market," Enderle said.

Still, Sun is betting that users are tiring of Microsoft's perpetual security problems. Sun Executive Vice President Jonathan Schwartz last week said the appetite outside United States for an alternative to Microsoft is "voracious".

"We are looking at relationships with government, nonprofits," he said at a press and analyst event. "The fact that we have reinvented the business around Java really should give you some indication of what direction we are taking this."

Officials recently mandated that government offices use software made in the country. Since Sun's platform is Linux-based, Chinese officials can modify code to suit their needs. Microsoft made its own