In addition, the deal represents the first in a series of Sun acquisitions seeking to level the playing field with partners such as IBM, Oracle, and Netscape, and to compete aggressively with Microsoft in the middleware market.
In the past, Sun has done well selling software tied to its hardware sales. But the company's move into independent software sales, as represented by its purchase of application server vendor NetDynamics, carries it into uncharted waters.
"Solaris has done very well as far as it being a leading Unix operating system for Sun, but how much attention has Solaris attracted outside of Sun?" said Laura Conigliaro, an analyst at Goldman Sachs, in New York. "You could go through the other key software products and say the same thing."
Sun officials said the company's new software strategy will revolve around software "infrastructure," the middleware that connects back-end data sources to intranets and the Web, which will require investment.
However, Sun's first show of hand, the NetDynamics purchase, exhibits a flawed approach according to some critics. NetDynamics gives Sun only a small piece of what it needs, and the integration needed may render the acquisition not worthwhile.
"Sun has made a strategic mistake with this acquisition," said Yefim Natis, an analyst at the Gartner Group, in Stamford CT. "Now in order to complete the whole picture of what they need -- and that includes messaging, transaction support, application integration middleware -- they will have to acquire other companies and integrate what they have with what NetDynamics has, which is a very difficult task and very likely to fail."
For instance, NetDynamics does not yet support Sun's Enterprise JavaBeans (EJB) specification, its Java Database Connectivity, or its Java Servlet APIs, and it uses Inprise's object request broker (ORB) technology instead of Sun's JavaIDL ORB. Integration of all these technologies may take as long as one year to complete, analysts said.
Sun responds that NetDynamics is more than a technology buy.
"What we were looking for with NetDynamics goes far beyond the technology," said Jonathan Schwartz, Sun's new head of enterprise products for the Java Software Division. "Market share was a huge consideration."
Another task for Sun is building the distribution channels, technical expertise, management expertise, and professional services the company needs to compete with more seasoned players in the middleware market.
Sun will also have to prioritize the needs of its customers versus its legal battles with Microsoft.
"If Sun could bury the ax and come up with a pure Java that everybody can use, I think it has a lot of promise," said Chuck Beyer, information officer at Northwest Natural Gas, in Portland, OR. "But I don't think it's going to happen. [Sun CEO Scott] McNealy, [Microsoft Chairman Bill] Gates, neither one of them are going to give in here."