Sun Micro: Growth the Operative Word

For anyone who wasn't clear on Sun Microsystems'(SUNW Quote) top priority going forward, the company's top brass spelled it out in bold letters Tuesday, when it gave its annual pep talk to Wall Street analysts.

One theme pervaded the event, with chief Scott McNealy and COO Jonathan Schwartz delivering speeches respectively titled "2006: Positioned for Growth," and "Growth: Sun's #1 Priority."

Growth is something that has eluded Sun for the last several years.

But according to McNealy, the last few years were a period of transformation at Sun, in which the company reinvented itself from the top down. Now, the time has come to reap the benefits of this reinvention.

"Shame on us if we can't deliver some growth and profits over the next 12 months," said McNealy.

Armed with a completely revamped product line, a fresh open-source software model and a leaner cost structure, Sun senior executives told analysts to expect increases in the company's financial results and its market cap.

Naturally, Sun will continue to sell to its traditional base of customers in the telecommunications and financial services industry who spend hundreds of millions of dollars on capital expenses every year.

But the company has set its sights on a new breed of customer to fuel its growth: Start-ups that are creating content, services and applications for the hordes of people connecting to the Internet.

Sun plans to net these customers through a variation of the classic razor/razorblade business model, giving away its Solaris operating system for free as a way to establish relationships with potential customers.

"We're not going to meet the majority of the new customers. So we're going to drive participation with software," said Schwartz.

With Solaris and Java both free and open-source, Schwartz said, the developer community is increasingly rallying around Sun software as a platform for building and running new Web services and applications.