Diba acquisition puts Sun in the toaster Business

Sun Microsystems' plan to acquire information appliance-maker Diba will see Sun will become an OEM manufacturer of networked consumer appliances - the proverbial intelligent toasters that are supposed to make companies like Network Computers Inc. (NCI) and Acorn so much money. But even before the deal is approved by Diba's shareholders, it has raised many questions about the consumer marketing strategy required from a company so used to doing business at the corporate level.

Sun Microsystems' plan to acquire information appliance-maker Diba will see Sun will become an OEM manufacturer of networked consumer appliances - the proverbial intelligent toasters that are supposed to make companies like Network Computers Inc. (NCI) and Acorn so much money.

Diba will retain all of its 79-member staff and become a division of Sun Microelectronics, called the Consumer Technologies Group.

Does Sun see itself as becoming the next NEC? Will it keep the Diba brand? Sun seems reluctant to say, promising instead to come up with a product roadmap at the Java Internet Business Expo later this month in New York. But it seems that Sun has no intention of competing with the consumer electronics giants. Its director of corporate marketing Marge Breya says that the Consumer Technologies division will not ship Sun-branded consumer products. She adds that her company is interested in "establishing a brand that reinforces the OEM's brand rather than competes with it."

Sun will have its work cut out for it, as it tries to compete - even as an OEM - in the consumer marketplace.

"What they know about the consumer space is very small," says Sean Kaldor, director of consumer device research at IDC. He says that issues like branding will become more important then they have traditionally been to a company like Sun.

Breya won't say exactly what brand name Sun's Consumer Technologies group will use, but she will say that Sun sees "Java as a common denominator" in the branding strategy. Of the Java brand, she says, "we're not only putting money behind it, but tons of brainpower." And she says that control over the Java trademark is important. "It is very important to be conscious of the way that that mark is used if you intend to benefit from that trademark or that brand in the future," she says.

Her comments raise what is becoming a dilemma for Sun. The company is being pressured on one hand to relax its control over the Java name - one of the key stumbling blocks in its recent application to make Java an ISO (International Organization for Standardisation) standard - while on the other hand the value of the Java brand to Sun seems to increase with each day and with each new product announcement.

According to Breya, the long-term plan is to make Diba's products 100% pure Java, but that will not happen overnight. IDC's Kaldor says that it would take some work to open up Diba's proprietary products. In fact, he says, one of the biggest risks Diba faces now that it is a part of Sun is "Sun telling them to turn everything into Java" before either the language or the Diba product line is ready.

Joe Gillach, Diba's vice president of marketing, says his division will take a pragmatic approach to Java. "Consumer electronics companies will dictate what they need in terms of...being 100% pure," he explains. "In some cases they may not be."

The relationship between the Consumer Technology division and the rest of Sun is also unclear. Breya says that the division has "reached a definite agreement to port MicroJava and MicroSPARC [chips] to the Diba platform," but she declined to say whether there would be an UltraSPARC port or whether Diba's application line, which includes a browser and a mail client, would be absorbed by SunSoft or JavaSoft.

Synergies with other Sun business units, however, could be the key to the success of Diba within Sun. Kaldor points out, for example, that "one of the great things about Sun is that they own the teleco industry." And Diba, he adds, has been focusing much of its energy on the screen phone market. Now that Sun has acquired some technology for the front end of these consumer appliances, "there could be some really interesting products at the back end," he says.

Figuring out how to work with the rest of Sun could pose a risk as well, cautions Kaldor. He says that other than the danger of being forced to push their product line too quickly into Java, the greatest risk Diba faces is becoming bogged down with the internal strategizing and positioning meetings of a multi-billion dollar company like Sun.

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