Skeptical analyst downgrades Sun

Unconvinced that new server introductions have changed Sun Microsystems fortunes thus far, Sanford C. Bernstein analyst Toni Sacconaghi has downgraded the software and server maker from market-perform to underperform. He also lowered the company's stock target price from $4.20 per share to $4.

"While Galaxy/Opteron products continue to do well, they represent less than 5 percent of revenues; Niagara offerings are facing a longer adoption cycle, given their uniqueness, requirement for Solaris 10 and lack of Linux support, and we see no material impact from them for at least two more quarters, and ultimately wonder if they will be additive or cannibalistic," Sacconaghi wrote in a Friday report.

Sun's "Galaxy" line of servers, which went on sale in October, use Advanced Micro Devices' Opteron processor; the Sun-designed systems mark a major turning point in the company's formerly frosty attitude toward x86 machines. The newer "Niagara" systems use Sun's UltraSparc T1 processor, an aggressive design that can run as many as 32 independent software tasks simultaneously.

Sacconaghi also said Sun has more troubles besides just getting new server lines to catch on. "The newly acquired StorageTek business appears to be struggling, and delays in (Sun Fire V490 and V890) UltraSparc IV+ processor server availability appear to have limited some business in the quarter," he said. In addition, the company still lacks revenue growth and has been losing share of Unix server sales.

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