@chandu, I'm pretty sure the code will throw an error message.
From BOL syntax for dropserver: sp_dropserver [ @server = ] 'server'
[ , [ @droplogins = ] { 'droplogins' | NULL} ]
It looks like you need to use old server name.
@OP:
select @@servername will show you current server name, copy that and replace 'server' in the following with the output:
sp_dropserver 'old_server'
GO
sp_addserver 'new_server', local
GO
exec sp_helpserver