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Monday, July 24, 2006

Widely Held 48 Hour Clock: Sun Won't Get It Done

Stocks: (SUNW)(IBM)(HPQ)(DELL)

Sun Microsystems will report earning shortly and Wall St. is not showing much hope about the results. The company's stock trades at $3.85 and has been dropping for the last few days. The 52-week low for the shares is $3.57.

Sun can cut all the people it wants to, which it has done. It can also add new server lines which are upgrades to its older products, which it has done. But, the company has simply fallen behind larger companies in the race and the distance is too great to make up.

The company has offered open source versions of its Solaris and Java programs, but this does not mean the they will be adopted over much more widely used server software like Linux and Microsoft. Linux is already open source and cheap.

Sun is also competing against entrenched products from IBM, Dell, and Hewlett-Packard. Sun's string of loses and shrinking staff may actually be a reason that large companies would shy away from its products. Why take the risk?

According to Morningstar,Sun's net loss in the last quarter was $217 million. In the quarter before, it was $223 million. And, revenue was down from the December 05 quarter to the Marh 06 quarter.

Cost cuts may help the margins at Sun. The top line is the issue, and not may investors see that improving.

Douglas A. McIntyre can be reached at He does not won securities in companies that he writes about.

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