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Sun Loses its Cool - Barrons

Sun Loses its Cool - Barrons

Barrons says that "The market is losing patience with McNealy," in a story called "Is Sun in Eclipse?" that follows on the heels of Merrill Lynch's open letter to Scott and the Sun board telling them to get it together after the company said it would take a $1 billion non-cash deferred tax write-off. Barrons said, referring to the write-off, "That sounds dramatic, but in truth [it] is much less worrisome than the increasing evidence that Sun's market position is eroding. Sun blamed the weaker-than- expected results on 'intense market and competitive dynamics,' which analysts translate to mean the company continues to suffer the consequences of computer buyers' increasing preference for low-end servers based on Intel microprocessors and the Linux operating system over Sun's offerings. Laura Conigliaro at Goldman Sachs thinks the company can boost its bottom line by six cents a share per year for every 2,500 layoffs. Toni Sacconaghi, at Bernstein Research, argued in a recent research note that Sun would have to fire 7,000 to 8,000 people to bring it in line with reductions at other tech firms. Sacconaghi wrote he is 'hearing chatter' Sun is mulling cuts of 5,000 or more." Barrons adds that Sun, "once the Valley's coolest company, looks, well, old. Arnie Berman, technology strategist at SoundView Technology Group, theorized in a research note last week that its recent earnings shortfall 'can be attributed at least in part to the fact that no self-respecting CIO nowadays will admit to wanting to do more business with Sun. Buying server hardware from Sun in 2003 is about as cutting-edge and cool as buying mainframe hardware from IBM was 10 years ago. Sun still has some loyal customers, great technology and a pile of cash. Like IBM 10 years ago, it needs a new strategy. Without one, it seems destined to founder, at best.' "

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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