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Bear Stearns Lowers Sun Micro to 'Underperform'


Bear Stearns downgraded Sun Microsystems (SUNW) to underperform from peer perform.

Analyst Andrew Neff says business is deteriorating significantly. While the company didn't give much details, it said the sharp shortfall, amidst an improving backdrop for information-technology spending, highlights fundamental challenges for Sun's business and its operating model. He says Sun needs massive restructuring. The challenge is from Intel-based hardware; the question is whether Sun's current management team can take the necessary steps.

Neff thinks Sun seems to be in denial at the enormity of the challenge. The strong balance sheet enables Sun to survive -- but the potential for thriving is less likely.


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