The Real Story: Blister in the Sun Microsystems

Here comes the sun, here comes the sun, and I say it's all right.
-- The Beatles

It's tough to find a more hated stock on Wall Street than Sun Microsystems(SUNW Quote). It's not hard to imagine why. A lot of people lost some serious scratch on Sun. The stock traded as high as $64.65 in September 2000, only to lose 96% of its value before bottoming out at $2.34 in October 2002. The stock has nearly doubled since then, but is still off a heart-stopping 93% from those lofty levels of 2000.

Furthermore, Sun has been profitable in just five of the past 20 quarters and cash flow positive in just four of the past 20 (in fairness, cash flow from operating activities has been positive for eight consecutive quarters). The company's cost structure is too high and it is giving away its software. Not exactly the stuff upgrades are made of.

In fact, only three sell-side analysts rate the stock buy, compared with 13 holds and seven sells. ...