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Monday, October 30, 2006

Sun Micro, Almost Good Enough (SUNW)(HPQ)(IBM)(DELL)

Sun Microsystems is one of those companies that gets applause when is loses less than it used to. Imagine what would happen if it made money. It’s a queer world, but Sun’s modest progress is earning it some fans.

Sun’s stock has made an impressive move from $3.82 in July to $5.50 last week. That’s 43% in under four months, and it may be a little bit over done.

Sun did have a pretty good quarter. Revenue rose 17% to $3.189 billion. Net loss was $54 million. A year ago the number was $123 million.

Some analysts are buying into a big comeback at Sun.

Sun has acquired some companies like Storage Technologies and See Beyond, so not all of the company’s growth is “organic” to use a slick business school phrase. It certainly makes the revenue growth less impressive.

Sun’s biggest problem is that its core server business competes with companies like IBM, Dell, and Hewlett-Packard. The breadth of their product lines and the size of their sales staffs make every piece of shares Sun goes after subject to equal interest from larger companies with stronger balance sheet.

A 43% return is a hell of a thing. Just don’t count on its happening again.

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

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