BEA gains as Sun worries ease

Shares of BEA Systems gained Friday as worries about competition from Sun Microsystems eased and BEA CEO Bill Coleman said he is confident the enterprise software company will meet Wall Street estimates.

BEA investors cheered as Sun Microsystems (Nasdaq: SUNW) on Thursday evening denied a report that it was going to bundle its own server software into its Solaris operating system, a move that would have hurt demand for BEA's products.

Over Wednesday and Thursday, BEA Systems (Nasdaq: BEAS) shares took a beating on a report in Info World, a trade publication, that said Sun Microsystems is considering bundling a free version of its iPlanet application server into its version of its Unix operating system, Solaris.

That would have been bad news for BEA, which charges customers for its competing product, BEA WebLogic, Java-based application server software that's used for integrating e-commerce applications with older network computing and legacy software.

But after Sun denied the report, shares in the e-business infrastructure software maker rebounded, gaining $2.19 to $28.38, or 8 percent Friday.

The fact that Sun responded so quickly to support BEA was also taken as a good sign.

"Sun's quick response to squash such speculation demonstrates how important BEA is to Sun," Lehman Brothers analyst Neil Herman wrote in a report. The analyst maintained his "strong buy" rating and said that "BEA is poised to report another solid quarter."

Investors also cheered BEA's outlook, which was discussed on a conference call that was originally scheduled to talk about the Sun rumor. The call was sponsored by SG Cowen, a brokerage firm.

BEA reiterated the projections that it announced Feb. 22. First Call now expects the company will earn 8 cents a share in its first quarter.

In the 16 quarters BEA has been public, it has increased guidance every quarter but one. "I'm going to keep that string going," Coleman said. In its most recent quarter, BEA also upped projections for 2001. The company said it would earn between 39 cents and 41 cents a share in fiscal 2002. First Call consensus had been expecting a profit of 37 cents a share.

"We've seen our pipeline continue to build," Coleman said. We don't see any change in demand." What's more, he said the company's backlog of orders indicates that demand for its products is "in a dramatic growth phase.

"This week's review shows we may not only be comfortable with our increased guidance, but we may build backlog in the first quarter," Coleman said.

BEA's ability to raise projections while others in its sector lower them is exceptional, especially considering how established competitors like Oracle have stumbled and taken the entire sector with them.