Sun Microsystems (SUNW) has had the hot hand in the server and storage business. Data from research firms showed it taking share from heavy weights like IBM (IBM) and Dell (DELL).
But, Bernstein downgraded the stock from "market perform" to "underperform". It indicated that Sun’s business has not been doing well over the last quarter.
But, Sun’s stock has been getting expensive. It traded for $3.81 last July. It recently moved above $6.50. The Bernstein sell-off has brought it down to $5.85.
This quarter may be the most critical for Sun in a couple of years. The new management has cut costs and people. And, the purchases of See Beyond and Storage Tek have bulked up revenue. But, Sun still needs to demonstrate that it can grow without acquisitions, and that revenue is running up fast enough to get operating margins from its lower costs.
If the quarter is bad, the belief that Sun is headed for a turnaround will take a mighty blow.
Douglas A. McIntyre