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Shares of Sun Microsystems have fallen close to 15 percent during Tuesday's trading, as investors react to a massive charge taken by the company.

Yesterday, Sun revealed that it is to take a $1.05 billion charge, turning what was once $12 million fourth quarter profit into a $1.04 billion loss. The accounting shift came as a result of what Sun sees as an extremely tough first quarter that will crimp its taxable income.

Investors did not stomach the news well, sending Sun's shares down 14.50 percent to $3.30, at the time of this report. Analysts also chimed in and cut their expectations for Sun's stock.

Morgan Stanley has put Sun at "underweight" down from "equal weight" and Bear Sterns has knocked Sun to "underperform" from "peer perform." A.G. Edwards also downgraded Sun to "sell" from "hold."

Analysts are pointing the same line that has dogged Sun since the downturn hit. They perceive customers moving away from Unix boxes and toward Linux servers - a shift which cuts into Sun's Sparc/Solaris business.

Sun tends to have very conservative accounting practices. It's financial reports are crisp and clean, and some analysts see the accounting change as a move in line with this straightforward tradition and little else. The rash of downgrades, however, indicates that many see the earnings revision as more than a book-keeping safety measure.

Sun still has billions in the bank and can weather the storm as it tries to realign its business to meet changing trends. The company has given into pressure and started shipping Linux servers and keeps trying to match Dell on price wherever possible.

Billion dollar charges, however, tend to bring out the worst in the financial community with Sun facing pressure to make more drastic changes and right its falling shares. ®

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