Bernstein downgrades Sun Microsystems (SUNW ) to underperform from market perform.
Analyst Toni Sacconaghi says Sun Microsystem's 50%-plus run-up since August appears to reflect expectations for a notably stronger financial performance based on improved IT spending and an upgrade cycle to Solaris 10.
He says channel checks suggest overall IT spending is fairly strong in the fourth quarter of calendar year 2004, but says Sun's quarter did not experience material acceleration. Sacconaghi doesn't see an upside to its second-quarter fiscal 2005 (ending June) revenue estimates.
While he applauds the company's effort to reinvent itself and its new initiatives, he doesn't see enough evidence to warrant holding Sun at current levels. He sees 4 cents fiscal 2005 earnings per share, and 12 cents fiscal 2006 earnings per share.