Dropping profits and stock prices have analysts speculating that Sun could be a target for either acquisition or a restructuring in which the company would sell off parts of the business and focus on a smaller set of technologies.

"In 12 months, Sun will not be the same company it is now," predicts Enterprise Strategy Group (ESG) analyst Brian Babineau.

Sun's main products include Sparc processors and servers, the Solaris operating system and Java software.

While the entire company being purchased is a possibility, another option is a carve-out plan allowing Sun to offload some areas of the company and focus on those that remain innovative, Babineau says.

Sun's operating system business and StorageTek line are still doing well, Babineau says. The company is really struggling in servers and server virtualization, however, he says. (Compare server products.)

Sun's server revenue and market share both dropped this year, according to a July report by Gartner. For all Sun businesses, net income for the fiscal year that ended June 30 was US$403 million, a full $70 million less than the previous year.

Sun's stock, which was trading at a high of US$24.92 last October, was selling for just under $10 this week.

"They're squeaking out quarters, they're trying to cut costs," Babineau says. "It just doesn't seem like there's any long-term strategy over there that will generate revenue growth."

In a July 31 report, the 451 Group analyst firm raised the possibility of Sun being acquired. "Sun's sunken stock price creates a relative bargain considering its roughly $4 billion cash on hand, sizeable intellectual property and patent portfolio, and of course, its respected technology and products," 451 Group analyst Jay Lyman wrote. "These assets could make it easier for an acquirer to roll the dice or to sell the idea to their shareholders."

Fujitsu and HP would be leading candidates if Sun is for sale, Lyman wrote. Fujitsu "is already aligned with Sun, given its role in manufacturing Sparc processors and hardware," he wrote. A Sun buy "could also give Fujitsu, or any other potential acquirer, an instant open source product line."

HP could see a Sun acquisition as a way to get deeper into open source software, Lyman wrote. Even though HP hasn't contributed a lot of code or resources to open source, it has benefited by certifying its hardware for Linux.