Sun Slides on Analyst Downgrade

Sun Microsystems (Nasdaq: SUNW) was downUS$1.81 at $20.44 Wednesday morning following reports that Merrill Lynch &Co. downgraded the stock, because of concerns that the slowing economy couldhurt demand for Sun’s products.

Merrill analyst Thomas Kraemer reportedly downgraded the Palo Alto,California-based software maker to neutral from accumulate, sayinginventories are at the highest level in three years.

Sun shares are down from a 52-week high of $64.66, reached in September.The stock, along with others in the technology sector, has fallen amidconcern about a downturn in corporate spending on technology and software.

Sun officials are holding a quarterly conference call after the close oftrading Thursday, and some investors are reportedly expecting them to usethe call to issue a lowered outlook for the coming quarter.

In the last fiscal quarter, Sun beat analyst estimates and said revenue rose 19 percent despite a slowdown in U.S.personal computer sales. Chief executive officer Scott McNealy called it “anoutstanding quarter.”

Sun recently unveiled software designed to allow users to access files not only fromwork, but also from home via a personal digital assistant (PDA) or cell phone.Analysts said the new Sun Open Net Environment (Sun ONE) Webtop is a rivalto Microsoft’s .NET products.

Sun said that Sun ONE products are based on an open architecture, including Javaand XML. Sun ONE Webtop is currently in beta testing and is expected to beavailable by the end of the first quarter. The Microsoft .NET products are dueout later this year.

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