ANALYST WATCH: Sun making life easy for "experts"

A company that's only missed analysts' quarterly earnings estimates once in the past five years makes life pretty easy on analysts. So it comes as no surprise that few missed the opportunity to either upgrade or raise estimates on Sun Microsystems this week.

Sun topped Street estimates by 2 cents a share by returning a profit of $275 million, or 33 cents a share, on sales of $3.12 billion in its first quarter.

First Call consensus expected Sun (Nasdaq: SUNW) to earn 31 cents a share in the quarter.

Following the expected good news, Credit Suisse First Boston and Lehman Brothers raised their fiscal 2000 and 2001 earnings estimates.

Banc of America Securities upgraded Sun from a "market perform" recommendation to "buy."

And why not?

Sun's $3.12 billion in sales represents a 25 percent improvement compared to the year-ago period when it raked in $114 million, or 14 cents a share, on sales of $2.5 billion.

"Our success in the first quarter came at the expense of our traditional competitors," said CEO Scott McNealy in a prepared release. ``We gained share in many of our key markets, especially in servers for the Internet and service providers. Many are talking about 'e-everything' strategies while we are delivering real solutions for the service-driven network. Sun is powering the 'Net."

Company officials said corporate customers downloaded nearly one million copies of its StarOffice suite in a little more than a month.

Last quarter, Sun topped analysts' estimates, earning $395 million, or 48 cents a share, on sales of $3.51 billion.

First Call consensus expects Sun to report a profit of $1.71 a share in fiscal 2000.

CS First Boston raised its fiscal 2000 estimate from $1.71 a share to $1.78 and its fiscal 2001 estimate from $2.15 a share to $2.20.

"Sun's coordinated control over intellectual property -- operating system and microprocessor -- make it more proactive in the Net economy, giving it a crucial time-to-market edge over competitors," said CS First Boston analyst Amit Chopra in a research note. "We believe that Sun's technology focus and first-mover advantage in the fast-growing service provider market should shelter its gross margin from competition."

Lehman's George Elling added: "Sun had a very active first quarter, during which it unveiled several important initiatives. These included its MAJC microprocessor, its relationship with StorageTek, two acquisitions (Forte Software and Star Office), the Sun Ray enterprise appliance, and the iPlanet server."

Sun shares peaked at 99 7/16 earlier this month after trading at a 52-week low of 21 13/16 last October.

Nineteen of the 23 analysts following the stock maintain either a "buy" or "strong buy" recommendation.

Good news for online travel sites

Analysts were pleased by United Airlines recent decision to cut traditional travel agency commissions from 8 percent to 5 percent, in line with the commissions given to online agents such as Preview Travel (Nasdaq: PTVL).

Other carriers followed suit, bring to an end the double standard that existed for traditional and online agents.

"We expect lower commissions could lead to higher service fees from land-based travel agents and/or a decline in customer service levels," said Keith Benjamin, an analyst at BancBoston Robertson Stephens. "Should more land-based agents start adding service fees given their higher transaction processing costs relative to online agencies, we expect more online lookers could choose to complete their transactions online in favor of better pricing and customer support."

Preview Travel shares were trading around $30 a share Friday.