HP Goes After Sun Customers

Hewlett-Packard will offer Sun Microsystems customers $25,000 in services as an incentive to switch to HP systems running Linux, the company confirmed to internetnews.com Friday.

The migration plan, which HP is characterizing as a “Linux lifeline to Sun customers,” is a sales and service program intended to help Sun Solaris customers move to Linux. HP said Sun customers who sign up will get a combination of assessment, porting and migration services valued at about $25,000, covering up to three applications the customer wants to move to an HP ProLiant server running Linux. The customer would also get use of the server for up to 30 days for proof of concept testing.

The plan also includes an HP StorageWorks storage area network assessment at no charge.

“Customers are telling us it’s time to take advantage of the economics of Linux while cutting their risk and architecting for the future,” said Marc Jourlait, vice president of enterprise marketing programs with the HP Enterprise Systems Group.

The offer from HP comes in the midst of a bad period for Sun. On Monday, the once high-flying systems vendor warned that it would run a loss of between 7 cents and 10 cents per share in the most recent quarter, a significantly higher loss
than the roughly 2 cents per share loss analysts were anticipating.

On Thursday, Merrill Lynch technology analyst Steven Milunovich, in an open letter/research note, urged
to slash as much as 15 percent of its workforce and focus on being
a niche player in mission-critical computing or risk being acquired — or worse.

HP appears to be taking Sun’s current woes as an opportunity to press
its advantage, and apply further pressure on Sun’s margins.

“This is really the type of thing that companies do all the time. They see a competitor who has a weakness and they go after it,” Gordon Haff, analyst with Illuminata, told internetnews.com. “IBM and Sun have both been
aggressively going after HP customers, particularly Alpha customers, which
they feel are vulnerable because of the transition away from Alpha.”

He also noted that discounting is a day-to-day reality in the industry, and
it is entirely possible that a Sun customer looking to switch to HP would
have been able to negotiate a $25,000 discount anyway.

But Haff doesn’t think a price war is in the offing.

“HP has expressed, in their last report, some concerns about their own
margins in certain markets,” Haff said. “I don’t necessarily see HP trying
to get into a price war with Sun in this case.”

Haff said between Sun’s warning and Milunovich’s letter, “HP is looking to capitalize
on a certain feeling out there, or certain impression out there, that Sun
has fundamental problems. “That’s not to say that Sun does have fundamental
problems, but there’s certainly a perception out there in some circles that
Sun is through.”

Sun’s Director of Communications Michael Hakkert, has said the company is making steps to return to profitability, and pointed to Sun’s fiscal 2003 results, which showed that Sun improved its margins by close to 5 percent on servers, and 1.9 percent in
services, while cutting $477 million for its administrative overhead and
costs during the year.

News Around the Web