Badly bruised in a slumping high-end Unix server market, Sun is positioning itself to fight back with a new software strategy, a focus on low-end boxes and a promise to take the cost and complexity out of IT.Badly bruised in a slumping high-end Unix server market,\u00a0Sun\u00a0is positioning itself to fight back with a new software strategy, a focus on low-end boxes and a promise to take the cost and complexity out of IT.It's a marked departure for the server vendor that made its name by peddling powerful boxes running its SPARC processor and Solaris operating system. Sun hit its peak during the Internet boom when generous budgets let users spend big money on top-shelf gear. At that time Sun's stock price soared above $100, but today it hovers around $4.Sun's fortunes have faded in large part because of the company's refusal to latch on to generally accepted trends such as the move to x86-based servers and\u00a0Linux, industry watchers say. Sun placed little emphasis on professional services, instead selling its hardware to technologically savvy buyers in telecom, defense and financial services.Others such as\u00a0HP\u00a0and\u00a0IBM\u00a0were hit as well, but none as hard as Sun, whose fortunes were closely tied with Internet start-ups that used Sun boxes to support the back end of Web sites. And, unlike its competitors, Sun didn't have lower-cost platforms to offset the drop in spending on high-end boxes.Sun says it hopes its reversal in several areas - embracing x86 and Linux and a renewed focus on services - emphasized with new software packages at last week's SunNetwork user conference will help ensure a brighter future.The company is making a big push into software and hoping a bold pricing and delivery strategy will lift its position against\u00a0BEA Systems, IBM and\u00a0Microsoft.Its new\u00a0Java Enterprise System, code-named Project Orion, bundles Sun's infrastructure software, from the Sun One application server, Web server and portal server to directory, calendaring and messaging. The product will be updated quarterly and sold to customers for $100 per employee with unlimited use for Internet applications.The pricing caught the attention of encyclopedia and reference book publisher World Book in Chicago, which bought the integrated stack from Sun partner Dewpoint to create a customer portal."We were exploring options. Sun, BEA and [IBM] WebSphere were in the mix," says Tim Hardy, CTO at World Book. "The pricing for us really made it an easy decision. . . . When you look at per-processor pricing, you're tied to how many users you have. When you have more users you need more processors. This takes that out of the equation. Our usage can double, and we don't have to pay twice as much for software."Sun also is taking aim at the desktop, introducing its Java Desktop System, formerly known as Mad Hatter, which costs $50 per employee as an add-on to the Sun Java Enterprise System. By itself, the desktop system, which includes StarOffice, Mozilla open source browser, e-mail, collaboration, RealNetworks Real ONE and Macromedia Flash, costs $100 per desktop.Both packages will run on Solaris or Linux, as Sun continues its commitment to the open source operating system.Sun hopes to appeal to a wider customer base with these integrated packages coupled with lower-priced equipment, including a new SPARC-based four-processor v440 announced at last week's user conference. It costs less than $10,000 for a two-processor configuration and starts at about $16,000 for a four-processor configuration. After watching revenue jump 16% in 2001, Sun experienced a steady stream of bad news with revenue dropping almost 32% in 2002, and another 9% in 2003.Sun's slide was enough to prompt rumors of a takeover this summer, although analysts says that with almost $6 billion in the bank and a market capitalization of $13.5 billion, Sun's price tag likely would dissuade potential suitors.Still, Sun isn't taking its situation lightly. The company last week also confirmed rumors that it is laying off workers. According to a company statement, about 3% of its workforce, or about 1,000 of its 36,000 jobs, would be cut. Sun had more than 43,000 employees at the end of 2001.The company also has seen an exodus of top managers,\u00a0the latest of whom was Bill Joy, a founder and Sun's chief scientist. Even CEO Scott McNealy has come under fire: Earlier this year, a critical report issued by Meta Group concluded that Sun would be better off if McNealy stepped down.If Sun is paying attention to the criticism, it isn't letting on. It's focus on research and development, often an issue of concern for financial analysts remains strong. R&D accounted for about 16% of its budget in its 2003 fiscal year and a number of initiatives are in the works, including improving the performance of its UltraSPARC chip by letting each chip handle multiple CPUs. Sun calls the approach "throughput computing.""We're continuing to invest about $2 billion annually in R&D," says Clark Masters, executive vice president and general manager of Sun's enterprise systems.Nevertheless, a large reason for Sun's financial trouble is a decline in the Unix server market, which lost 40% of its value - or about $12 billion - between 2000 and 2002, according to IDC. In contrast, the market for x86-based servers running Linux is expected to grow 34% this year as compared with last year and reach $3.1 billion, according to the market research firm.Sun acknowledged the trend this year and, after steadfastly shunning the x86-based world,\u00a0rolled out x86-based servers of its own. It also is expanding its commitment beyond Solaris to ensure that its offerings also run on Linux.Had Sun embraced the operating system and x86 sooner, its fortunes might have been different. Bill Hicks, senior vice president of technology and CIO at Precision Response in Miami, which provides customer care services for major corporations, says he might not have strayed from Sun had Linux been an option last year."A year ago, when we wanted to go with Linux, they didn't have a Linux strategy," says Hicks, who had standardized on Sun hardware about six years ago.Because Sun didn't offer a Linux alternative, he decided to scrap some Sun boxes to run Linux on clusters of Intel-based boxes from\u00a0Dell. He says the $300 million-per-year company saves $18,000 a month as a result."They missed the mark from a hardware standpoint because they were reluctant to go to x86," he says. "If it wasn't their chipset and their operating system they weren't interested. They were overconfident that people would not go down to the Intel or the Linux strategy. They felt no one would do that to them, and they did."Hanging toughWith nearly $6 billion in the bank, Sun shouldn't be written off too easily. The question is will Sun's shift in strategy lift it out of its current rut.Challenges:Strategies:\u2022\u00a0 Pesky x86: Sun was slow to embrace the standard x86 platform from Intel and AMD, and now must play catch-up in a market that is growing fast.\u2022\u00a0 Slashing prices: Roll out low-end boxes -- both x86 and SPARC -- with prices that undercut even Dell in an effort to woo customers who might not look at Sun as a low-end, low-cost supplier.\u2022\u00a0 Leveraging Linux: The company scrapped its own Linux distribution earlier this year, leaving some users questioning its commitment to the Open Source operating system.\u2022\u00a0 Loyal to Linux: Sun has inked deals with both Red Hat and SuSE to support Linux and its new integrated software stack, the Java Enterprise System, will run on Linux.\u2022\u00a0 Perceived as proprietary: Many users consider Sun a high-end proprietary box dealer.\u2022\u00a0 Choices, choices: Give customers options: Solaris or Linux on x86; Solaris on SPARC or x86.\u2022\u00a0 Considered complex: The company's longtime focus on big servers makes some businesses shy away from Sun equipment, although Sun is stepping up its services to cut complexity.\u2022\u00a0 Cutting complexity: Deliver business-focused systems that include preintegrated and pretested hardware and software configurations with the goal of removing complexity. Sun says it also hopes a new software strategy that prices an integrated stack of middleware at $100 per user will appeal to customers.