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Sun, EMC slide on Goldman comments

Lowered estimates from Goldman Sachs sour investors on the networking and data-storage companies.

Lowered estimates from Goldman Sachs have soured investors on networking company Sun Microsystems and data-storage maker EMC on Tuesday.

Sun shares fell $1.71, or 8 percent, to $18.76. EMC shed $2.08, or 6 percent, to $35.02.

Goldman Sachs analyst Laura Conigliaro lowered estimates for the two companies, citing checks "which continue to suggest that, even on downward revised expectations, both companies may have difficulty meeting forecasts." Sun's midquarter update call after Tuesday's bell isn't expected to yield good news, either.

Conigliaro had already slashed her 2002 earnings outlook for Sun, just after the Palo Alto, Calif.-based company reported its third quarter and said it expects fourth-quarter earnings to be flat to down compared with the third quarter. Since then, CEO Scott McNealy has called the company's numbers "rough" estimates and shot down the notion of being able to give projections in the current environment.

EMC, on the other hand, has been vocal in reiterating its forecast. CEO Joe Tucci backed up the Hopkinton, Mass.-based company's forecast for more than 20 percent revenue growth this year in mid-May. "We're seeing a firming of IT budgets throughout the United States," he told reporters after the company's annual meeting. "We are seeing budgets get set."

"The issues continue to be the same," Conigliaro wrote. "No notable improvements in the U.S., slowing in Europe and possibly in Asia/Pacific, fierce pricing, and in the case of Sun, a suboptimal product cycle."

The analyst now expects revenue growth from the March to September quarters to stay flat for both companies.

For EMC, that puts Conigliaro's estimate of growth at 14 percent for calendar 2001, vs. the company's target of 20 percent. Her earnings estimate was 76 cents per share, vs. a previously estimated 81 cents a share.

For Sun, Conigliaro now expects 12.8 percent growth for the calendar year, vs. the company's prediction of 15 percent growth. Earnings are estimated to be 50 cents a share, vs. her previous estimate of 53 cents.

Conigliaro wasn't the only analyst to issue a cautious note on Sun Tuesday.

"We expect management will reaffirm its last guidance of 15 percent-plus as target revenue growth for full year 2002," SG Cowen Securities analyst Richard Chu wrote of the company's upcoming call. But the analyst added that although this may be "doable," it will be a far reach for the company.

Bernstein analyst Toni Sacconaghi said that investors will be expecting the company to clarify its top- and bottom-line growth expectations Tuesday and that they should pay special attention to trends in Europe and to order backlog.

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