Sun Institutes Population-Based Prices

SAN FRANCISCO — Sun Microsystems plans today to announce a new pricing model for selling to governments of developing nations based on population size and degree of industrialization.

The Silicon Valley computer maker has struggled in recent years as corporate spending stalled and dot-com and telecommunications companies went into deep recessions. Now Sun is searching for ways to defend itself against trends like the shift by corporations to use open-source software and low-cost server computers. With that in mind, the new pricing strategy is just one of several steps the company plans to take.

For instance, to guard itself from pricing competition from rivals like Dell, Sun executives said the company will increasingly rely on its ability to sell complete systems — that is, those that include both software and hardware — for less money than it would cost consumers to buy a hardware-only computer and install Microsoft software on it.

Sun’s executives also said they would increasingly look for ways to apply pricing strategies that mirror the ones used by satellite television and cellular telephone companies. These businesses frequently hide the cost of set-top boxes and cellular phones in service packages that require customers to commit to long-term contracts.

“We’re going to corrupt the industry’s pre-established pricing models,” said Jonathan Schwartz, Sun’s president.

The company plans to introduce its new government pricing strategy today in Shanghai, China, at a quarterly product introduction meeting. Last November, Sun struck a multiyear agreement with a consortium of technology companies backed by the Chinese government to create a standard desktop software system for the country’s 1.3 billion citizens.

The new government pricing strategy will be based on a “per- citizen” model for licensing its software to federal, state and local governments of developing nations. Sun already uses a similar system for its corporate pricing — for example, it is selling its Java Enterprise software, based on Sun’s Solaris Unix variant and the open-source Linux operating systems, to corporate customers for $100 an employee a year. Industry executives said this compares favorably with Microsoft’s pricing for corporate software, which averages about $250 an employee a year.

Sun said it has approximately 175,000 employee customers under its corporate software sales approach.

The company will start its government pricing model by selling Java Enterprise, which lets customers provide e-mail, identity authentication and other Internet services.

Sun executives said it made sense to put government functions online.

“Why does the government run the post office?” said Schwartz. “A lot of these network services are natural evolutions of existing phone and mail services. It’s not all that far-fetched: our government delivers mail to every U.S. citizen.”

The software will be sold to governments for between 33 cents and $1.95 a citizen annually, depending on each nation’s development status as measured by the United Nations.

Separately today on Tuesday, Sun will announce a variety of hardware and software products in Shanghai. In addition to new pricing and service models, the company plans to announce upgrades to its Solaris operating system, new server and storage computers, and a new version of its Linux personal computer operating system, the Java Desktop System.