Sun Micro looks to new servers to pep up sales

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Sun Microsystems will on Tuesday take one of the most important steps in its bid to reverse its sliding market share with the announcement of a new line of servers based on an innovative processor that has up to eight “cores”, or brains.

By making it possible to handle more computing tasks on a single chip, while also reducing the electrical power needed to run the machines, the new servers represent a crucial part of Sun’s attempt to stem the loss of customers to the low-cost, standardised servers based on processors from Intel and Advanced Micro Devices.

Codenamed “Niagara”, the processors used in the new machines are the first in a series of ambitious bets on new silicon technology that Sun hopes will revive its flagging fortunes.

While most of the industry has turned towards standardised chip architectures, Sun has continued to invest heavily in its own Sparc line of processors, betting that it can sustain its comparatively high profit margins with superior performance.

The new machines are priced to undercut existing hardware from rivals IBM, Dell and Hewlett-Packard and represent an attempt by Sun to recover ground lost since its fortunes peaked at the end of the 1990s.

“We’re going after market share,” said Jonathan Schwartz, Sun’s president. “The problem for Sun hasn’t been [profit margins on] the parts we sell – it is to drive revenue.”

Every percentage point of market share Sun manages to recover will add $160m to its revenues and 1 cent to its earnings per share, calculated Richard Farmer, an analyst at Merrill Lynch.

However, in a note to investors, he added that the servers might eat into sales of other Sun products.

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