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Sun Separates Chip Group

Sun Microsystems (SUNW) is breaking out its silicon group into a separate business division, as the company moves to step up sales of its computer chips beyond its own products.

The Santa Clara, Calif., company said Tuesday that it has established a microelectronics group headed by Sun veteran David Yen. The group will focus on developing chips that target the high-performance computing, networking and cryptography markets.

Tuesday's organizational change is the latest move by CEO Jonathan Schwartz to rejuvenate the tech company, which has struggled since the dot-com bust several years ago. The company's stock is up 21% since Schwartz took the helm from co-founder Scott McNealy in April 2006 .

In January, Sun posted a modest profit, after a string of quarterly losses. And private equity firm Kohlberg Kravis Roberts invested $700 million in the company .

Sun's Sparc microprocessors are available in servers from Fujitsu. Other than that, Sun's chips are used exclusively in Sun's own line of servers and workstations.

"We're really seeing a market for Sun innovation outside of Sun, and that other people want to leverage what we've done," said spokeswoman Kathy Tom Engle. One example is Sun's Solaris operating system, which now runs on hardware from various computer makers such as Dell (DELL - Get Report) and Hewlett-Packard (HPQ - Get Report).

Tom Engle said the move to sell chips to other computer makers was driven by the success of the new line of UltraSparc T1 processors, formerly code-named Niagara, which have achieved more than $100 million in sales in each of the past three quarters.

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