Will a New Coat of Paint Make Sun Shine?

Having been in the PR business for more than a decade, I can appreciate a new marketing campaign as much as the next guy. So when News.com today revealed that one of my many former employers, Sun Microsystems (Nasdaq: SUNW  ) , is about to unveil a new $50 million branding initiative, I took notice.

The ideas look solid at first blush. Sun intends to convince potential buyers -- and, undoubtedly, investors -- that its servers and software provide essential links between businesses. By enabling networked computing (the thinking must go), Sun revs the engines of commerce. It's not an unfounded theory, since networks are involved in everything from playing video games to paying bills.

News.com also reports that Sun's new image will feature a slim S-curve to signify the global "sharing" of information. It also touches on the open-source revolution happening around the world, with which Sun has become fully engaged. Again, both make sense.

Yet there is also one really huge, ugly problem in all this: Sun is hardly the only company that moves data around networks or supports open-source software. Indeed, researcher IDC just reported that IBM (NYSE: IBM  ) and Hewlett-Packard (NYSE: HPQ  ) are in a statistical dead heat for server market-share leadership. IBM came in at 28.3% while HP notched 27.6% of global server revenue during 2005's first quarter. Where did Sun end? Down again, to 9.9%.

Investors so far appear unenthusiastic about Sun's makeover; the shares are trading lower by about one-half of a percent as I write. I can understand why. So many rebranding campaigns offer little more than a new coat of paint and some flashy new marketing materials. But not all of them; some combine marketing moves with structural business improvements. Sun may be in that camp.

During the fiscal third quarter, Sun trimmed its net loss by nearly $200 million after excluding special items, while gross margin also improved by a percentage point. If the rebranding takes hold, that momentum should accelerate. If not, well, look for a new coat of paint a year or two from now.

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Fool contributor TimBeyers is having his baby boy's room painted today. What's your take on Sun's rebranding? Will it make a difference? Share your thoughts with other Fools at the Sun Microsystems discussion board. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile, which is here. The Motley Fool has a disclosure policy.


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