Sun's Very, Very Bad Week - TheStreet

Updated at 3:27 p.m. EDT

Rubbing salt in the wounds of

Sun Microsystems

(SUNW) - Get Report

after a bruising week,

Hewlett-Packard

(HPQ) - Get Report

said today that it will offer $25,000 worth of services to Sun customers who defect to its own computer hardware.

In offering the deal, H-P is aiming to win over users of the Solaris operating system running on Sun servers to Linux on its own boxes.

H-P explains that it has singled out Sun because it believes the company has lagged in offering a credible Linux offering to its customers, an oversight at a time when markets such as the financial services industry are looking to move to standards-based processor and operating systems.

"I think customers are very concerned about how committed Sun is to Linux," says Mark Hudson, vice president of marketing for business critical systems for H-P. "They've just sort of dipped their toes in reluctantly. About a year ago,

CEO Mr.

Scott McNealy put on a penguin suit and said, 'Yup, this is the right way to go,' but in the last six months they've talked more about Solaris on x86 than Linux."

In response, Sun said in a statement that it "provides the most cost effective Linux offerings on x86." H-P's offer has "little substance, no real money, and no value proposition -- all in all,

it's little more than a PR campaign," maintained the release from Sun. "H-P's enterprise systems division continues to lose money at an increasing rate and creating the illusion of buying business at $25,000 a pop is not going to help improve its bottom line."

In the most recent quarter ending in July, H-P's enterprise unit lost $70 million on $3.7 billion in revenue.

For its part, Sun claims to have won over 40 H-P customers with

a competitive program it launched in July, which capitalizes on concerns about H-P's Itanium chip.

H-P's competitive jab comes at the close of an unhappy week for Sun. On Monday, Sun

took a hefty charge reflecting its own worries about weakness in the just-ended quarter.

And on Thursday, Merrill Lynch analyst Steve Milunovich penned an open letter calling on Sun to

enact big strategic changes or risk becoming "irrelevant."

One of Milunovich's charges, in fact, was precisely the same criticism as that made by H-P. He argued that Sun, a late entrant to the Linux market, hasn't made a convincing case as a Linux player. "Being late to Linux is unforgivable both because Linux is a kissing cousin to Unix and because Linux is a disruptive threat to Microsoft," he wrote, adding: "Linux is not associated with Sun, so at this point the best Sun can do is to make clear it aggressively supports Linux."

H-P said today that it will offer the deal to Sun customers through the end of the year.

The $25,000 in free services include an assessment, design and implementation, and the porting of one customer application from Sun's Solaris over to H-P's Linux at no charge.

On a day that saw broad-based tech gains after positive job data, H-P gained $1.08, or 5.5%, to $20.60, while Sun was up 8 cents, or 2.5% ,to $3.28.