"I think they can turn it around, but they won't turn it around as is," he says. "They have to shrink it up, take a cash infusion from selling a core asset and grow that smaller business."

In the view of one major investor, Sun is a software company, despite the fact it gets a large majority of its revenue from server and workstation sales. 

"Sun Microsystems is kind of interesting because it's progressively less of a server company and more of a software company; it's more about Solaris and Java," Staley Cates, president of Southeastern Asset Management, which recently bought a 21 percent stake in Sun, said at a shareholder meeting. "And that's kind of a change that we don't think the market's on to at all."

Southeastern Asset Management may want Sun to sell its hardware business, perhaps to Fujitsu, and focus on providing cloud computing services, an article in The Economist speculates.

But Sun hasn't made a big splash in the emerging cloud computing market, while vendors like IBM have continually harped on the potential of the cloud. "The idea that Sun could become a cloud computing services provider is a bit farfetched," says Pund-IT analyst Charles King.

Lyman thinks it might be a good idea for Sun to sell off its high-end server business to Fujitsu or perhaps HP. Sun and Fujitsu jointly develop Sparc enterprise servers, but this enterprise has been "somewhat of a burden" for Sun, he says.

Sun's second quarter server revenue dropped 7.2 percent year over year, to about US$1.5 billion, while rivals IBM, HP and Dell were able to grow their businesses, according to IDC. 

On the positive side, Sun was able to grow its storage revenue 29 percent to about US$494 million in the same timeframe. Sun attributes its growth to an "open storage" strategy that combines open source software with commodity hardware. Sun is also attempting to gain a foothold in the emerging market for enterprise flash memory.