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Zander: Sun gains from HP merger

Outgoing executive Ed Zander says that his company's competitive position against IBM and newly enlarged Hewlett-Packard is only getting better.

NEW YORK--Outgoing Sun Microsystems President and Chief Operating Officer Ed Zander said Thursday that his company's competitive position against IBM and newly enlarged Hewlett-Packard has improved over the last month.

"I expected more competitiveness" from HP after its merger with Compaq Computer, Zander said. But once customers get a look at the company's new business plan, he said, they're "ready to look at alternatives."

HP last month completed the largest technology merger in history by acquiring Compaq.

Zander, who will step down from his positions at Sun on July 1, spoke at Bear Stearns' annual technology conference at the Grand Hyatt Hotel here.

Zander said the HP-Compaq merger has been "a positive" for Sun over the last 30 days as several HP customers have approached Sun requesting sales presentations. He blamed the combined company's "narrowing focus" and indecisiveness for its customers' wandering eyes.

CEO Scott McNealy, speaking later at the Bear Stearns conference, said the company doesn't compete directly with HP anyway and suggested that Sun is interested in doing business with Canon.

"Canon is someone we'd love to partner with" because the company makes digital cameras and printers, he said. A partnership with Canon would make Sun's business almost an exact parallel with HP's, McNealy said.

Sun has also improved its competitive stance versus IBM, according to Zander.

"In the last quarter, we have gained more market share against IBM than we have in the last five quarters," he said.

McNealy also stressed that the company was doing well against IBM.

"IBM is not crushing us; we're crushing them," he said.

The long-running war of words between Sun and IBM shows no signs of abating. For its part, IBM said earlier this week that it has sold 200 of its new lower-end z800 mainframes in the two months since they went on sale, citing the figure as evidence that Sun is failing to lure customers to its own Unix servers.

Sun, meanwhile, has been vocal in its mainframe assault; last month it launched its "Blue-Away" project to convert mainframe customers to its servers.

IBM and Sun are also duking it out to steal multimillion-dollar deals from each other. While Sun has wooed away Galileo International, which supplies airfare pricing information to United Airlines and others, Big Blue recently announced that it has won a larger customer from Sun, Colgate-Palmolive.

Zander said he believes the market will prove Sun's "best of breed" approach to be preferable to IBM's services strategy. IBM's approach is to bundle technologies and services together, while Sun allows a company's IT department to pick and choose different hardware and software.

"The Genuitys and BTs (British Telecommunications) of the world can do a better job of outsourcing than IBM," Zander said.

Zander said he couldn't comment on Sun's financial performance because the company was in a "quiet period" leading up to its quarterly earnings report. He did say, however, that IT budgets remain tight, with weakness in Europe.

Bear Stearns said it hosted a dinner for Zander on Wednesday at which the topic of his departure came up.

"Zander indicated that there was a strong team, although (recent executive departures) continue to raise concerns," Bear Stearns analyst Andy Neff said in a research note.