Sterling Research raised its target price on Sun Microsystems ( SUNW) and reiterated its buy investment rating, citing, in part, the growing interest in Linux open source software.

The research firm's new target price is $7, up from $5, and the potential exists for upward adjustments. Sterling said it sees the company's market share position for its Linux/Unix servers and its application server software gaining ground.

Also, strong euro vs. dollar comparisons and Linux's increased reputation as a viable operating system could increase Sun's revenue and earnings. Analysts, on average, expect Sun to break even for the full year and earn 2 cents a share in the current fourth quarter.

Shares of Sun were up about 7.5% in morning trading to $5.29 following Sterling's comments.

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