Feeds

Six months in, Sun's CEO faces Wall Street's yo-yo test

Can he do the improbable?

Internet Security Threat Report 2014

Sun Microsystems could do something tomorrow that it hasn't done in years and years: please investors.

Those watching the deflated Sun know the earnings drill. Sun's shares start their march from around $4 a share to just over $5 a share as the company approaches its quarterly earnings announcements. Time and again, gullible investors buy into the idea that Sun will do better than the naysayers predict, and they inflate the stock accordingly. Time and again, Sun disappoints these investors, and the company's shares make their way back down to $4 shortly after Sun's earnings statement hits the newswires.

Here we are again.

Sun's stock is trading at more than $5.20 per share and has been above $5 for most of the past two months.

Unlike past quarters, Sun actually has some positive market share gains to lean on, as it nears the Thursday first quarter '07 dish. Sun has wrestled away Unix server revenue from IBM, and has seen its x86 server line grow at a very healthy clip.

The improving product sales and a hefty sales backlog have the likes of Sanford Bernstein's Toni Sacconaghi - a long-term Sun pessimist - singing the company's short-term praises.

"We expect Sun to deliver upside to consensus revenue expectations and in line earnings per share," the analyst wrote in a recent research note. "We forecast first quarter revenues of $3.3bn versus consensus at $3.2bn.

"We note that Sun exited Q4 with its largest backlog since Q3 of 2001 and that our channel checks indicate solid demand within the channel, although below last quarter's robust level."

The optimistic camp must enjoy hearing Sacconaghi talk in such loving terms. But they should not get too excited just yet. The analyst has a humble $4 price target for Sun and "believes that a solid quarter is largely priced into the stock."

Sun's management doesn't have the highest regard for Sacconaghi, particularly because the analyst often calls for heavy layoffs. Sacconaghi, however, has proven himself to be one of the most accurate and perceptive analysts watching the hardware market.

"We have had some pretty dramatic growth over the past year," bragged Sun CEO Jonathan Schwartz, speaking today at the Oracle OpenWorld conference. Later, he added, that Sun is "seeing a very large scale global build out."

Such talk backs up the optimism camp and Sun's own chatter about why Schwartz was handed the CEO role 184 days ago. Chairman Scott McNealy reckoned that Sun was poised for growth once again, and that a new fella might as well be attached to the company's gains.

Of course, it's hard to get too excited about Sun's near-term performance given that it remains unprofitable. Yes, the company pulls in lots of cash, but investors have trouble responding to negative earnings per share.

Schwartz will face his biggest Wall Street test to date on Thursday. He'll be hoping that Sun can reverse its $4/$5 share price yo-yo.

The CEO's 180-day report card largely hinges on this first quarter performance. And no one knows this better than Sun's long-term investors. ®

Internet Security Threat Report 2014

More from The Register

next story
Docker's app containers are coming to Windows Server, says Microsoft
MS chases app deployment speeds already enjoyed by Linux devs
IBM storage revenues sink: 'We are disappointed,' says CEO
Time to put the storage biz up for sale?
'Hmm, why CAN'T I run a water pipe through that rack of media servers?'
Leaving Las Vegas for Armenia kludging and Dubai dune bashing
Facebook slurps 'paste sites' for STOLEN passwords, sprinkles on hash and salt
Zuck's ad empire DOESN'T see details in plain text. Phew!
SDI wars: WTF is software defined infrastructure?
This time we play for ALL the marbles
Windows 10: Forget Cloudobile, put Security and Privacy First
But - dammit - It would be insane to say 'don't collect, because NSA'
Oracle hires former SAP exec for cloudy push
'We know Larry said cloud was gibberish, and insane, and idiotic, but...'
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Cloud and hybrid-cloud data protection for VMware
Learn how quick and easy it is to configure backups and perform restores for VMware environments.
Three 1TB solid state scorchers up for grabs
Big SSDs can be expensive but think big and think free because you could be the lucky winner of one of three 1TB Samsung SSD 840 EVO drives that we’re giving away worth over £300 apiece.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.