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Wednesday, August 16, 2006

Sun Rises? 10Q View SUNW

Over the last few weeks shares in Sun Microsystems have gone from about $3.80 to $4.65. Nice work if you can find it.

Sun has introduced some new products. And, some of the company’s existing products have signed on new customers. Sun’s Secure Mail was recently adopted by BellSouth and Verizon. The company introduced its new StorageTek modular storage family. Sun also introduced new Sun Fire servers and Sun Ultra Workstations. The company claims that these products bludgeon the competition with more computing power and speed that anything available in the high end of the market.

Of course, techs are up over the last few days on strong earnings from Cisco, but Sun’s run began before that.

A lot of the increase in Sun’s share should be attributed to the fact that a company known for screwing up did not do it again in the quarter ending June 30. The company’s revenue rose 29% over the same quarter last year to $3.828 billion. The number is a bit misleading since the figures for the most recent quarter include revenue from Storage Technology and SeeBeyond which were not in last year’s numbers. But server sales were up 14% for the quarter and revenue from services was up 24%. Again, the numbers are a bit misleading. A review of Sun’s 10Q shows that on a pro forma basis, if Sun had owned StorageTek for the June 30 period this year and last, revenue would have been flat at a little over $3.1 billion. On that basis, the company’s net loss would have almost doubled to $210 million.

So, what is it? The company did not have any substantial growth other than through acquisition. Sun is introducing some promising new products. Nothing to write home about.

The key may well be that the markets were worried that the ham handed management at Sun would not do a good job of integrating SeeBeyond and StorageTek, and the most recent quarterly results would seem to indicate that this is the case.

Sun’s investors can sleep a little better at night, so why shouldn’t the stock take a small tick up.

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

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