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 “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
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.

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