Sun Micro Falls After Estimates Cut
SAN FRANCISCO (Reuters) - Shares in network computer maker Sun Microsystems Inc. (Nasdaq:SUNW - news) tumbled 10 percent on Tuesday after Goldman Sachs lowered earnings estimates for the company, citing an expected drop in interest income.
The brokerage repeated its recommendation to buy the stock, which fell $1.19 to $10.93 shortly before the close on Nasdaq.
On Friday Sun reported a fiscal second-quarter loss which met Wall Street's consensus forecast and said it was making progress toward turning a profit in the fourth quarter.
However, its gross profit margin was lower than expected, as a number of analysts highlighted in reports.
Goldman analyst Laura Conigliaro, in a note titled ``The Worst Seems To Be Over Although Improvements Will Still Be Slow,'' cut her calendar 2002 earnings forecast for Sun to 10 cents per share from 16 cents per share.
She said the change was mostly due to revised ``other income'' estimates, which would be lower due to interest rates.
``Our RL (recommended list) rating is based on the favorable risk/reward we see in Sun stock over the next 12-18 months, particularly as higher volume enables Sun to leverage its operating model,'' Conigliaro wrote.
Technology stocks rose sharply in the last two months of 2001, and analysts have said earnings outlooks would have to be rosy to justify the run-up.
Sun's drop was bigger than for other technology heavyweights, although major computer makers were down across the board on Tuesday, with International Business Machines Corp. (NYSE:IBM - news) down $3.75 to $110.50 and Dell Computer Corp. (Nasdaq:DELL - news) off $1.23 or 4.3 percent, at $26.87.
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