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Sun Microsystems Courts Startups Once Again

In the late 1990s, Sun Microsystems Inc. promoted itself as "the dot in dot-com" -- a strategy that proved painful when the technology bubble burst.

But now that venture capital is again flowing to startups -- particularly the "Web 2.0" companies that encourage video and other online sharing among users -- the Silicon Valley hardware and software maker is reviving its courtship of small- and medium-sized technology firms.

Over the past year, Sun has quietly spearheaded an ambitious initiative to get startups to buy Sun's Solaris operating system instead of Linux -- widely considered the low-cost choice for penny-pinching startups.

Now Sun's going public with its campaign. On Tuesday, it hosted a mixer for executives, entrepreneurs, analysts and journalists in San Francisco, following last fall's inaugural "Startup Camp," where senior executives pitched to dozens of startup hopefuls.

"You've got a bunch of risky, cool ideas from small businesses, and they're spring-boarding into the mainstream," Sun Senior Vice President Peder Ulander said. "We're going to make a very public push and go after a group that hasn't traditionally been Sun customers."

Sun is by no means ignoring its biggest customers. The company said its products are used in 53 of the largest 60 publicly traded U.S. companies.

Sun products enjoy a reputation for quality, reliability and speed, but many startups reject them because of the company's reputation for pricey merchandise -- out of reach to all but the deep-pocketed multinationals.

In part because of that rap, stock has flagged, hovering at about $6. In 2000, at the peak of the dot-com boom, it briefly topped $60 per share.

Investors also worry that Sun could lose market share to Red Hat Inc., the North Carolina company that helps companies install and maintain their Linux systems.

Sun's startup initiative is meant to showcase a potentially lucrative new market -- particularly in developing countries. Like Linux, Solaris is open source, and the bulk of its contributors come from Brazil, Russia, India, China and Korea -- the entrepreneurial bloc Sun refers to as "BRICK."

"The focus and encouragement from these governments to move toward open-source systems has opened huge opportunities for Sun," Ulander said.

Sun simply needs to step in before those customers turn to Linux systems for good.

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