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New Sun Business Unit Targets OEM Deals

Sun Microsystems is launching a business unit focused on sales of its hardware and software to other companies which will incorporate the technology into their products for sale.

Known as OEM sales, Sun said the business covers all of its key hardware and software technologies

"Our objective is to grow our OEM business by penetrating the OEM areas we're in more deeply rather than look for new business, though we'll do that too," Joe Heel, the senior VP at Sun heading up the OEM unit told internetnews.com. "For the first time we'll have a budget and resources directly focused on this. The response from customers has been very enthusiastic."

Spurred by last year's big acquisition of tape storage provider StorageTek, Sun's OEM business was $1.8 billion in 2005. "We've learned a lot from StorageTek and the business is growing," said Heel. Ironically, one of the new OEM customers Sun inherited with the acquisition of StorageTek is longtime rival Hewlett-Packard .

While Sun has long sold to OEMs, under the new program those customers will get a lot more service and support including early access to product roadmaps, loaner or evaluation products, and support both before and after the sale. Heel said forty Sun employees will be involved in the OEM support effort.

Heel, who is based at Sun's Menlo Park, Calif. headquarters, said Sun has 35 OEM customers now in areas such as telecom and health care. Most are in Asia and Europe with five in the U.S. Sun's initial targets are network equipment providers as well as computer platform vendors in the healthcare industry and imaging OEMs.

Alcatel has already signed on and Heel said two others in the telecom space are also on board though don't want to go public. He said Sun would provide an integrated computing stack (hardware, OS, middleware and systems management) while the OEM customer adds its own value such as voice mail applications. Heel said one of the unnamed customers is actually a consortium of competitors that essentially are joining forces to get the best deal from Sun. One way they differentiate is by the different applications they include in their systems.

Heel also indicated Sun is close to a deal with a major handset supplier but would not elaborate.

Sun typically does not compete with its OEMs. "I think in general we are perceived as less threatening to our OEMs than our primary competitors are to their OEMs," said Heel. "We are actively positioning ourselves as the OEM provider who doesn't compete with their customers.

Sun's customers are generally under no obligation to co-brand products or credit Sun though Heel says it sometimes happens because the affiliation is deemed an added value. Sun has been actively branding Java and there are some contractual obligations to use the Java logo where that's part of an OEM deal.