On a day when most tech shares were gaining,


(SUNW) - Get Report

bucked the trend, losing ground in the wake of an underwhelming quarter. Shares of the server and storage hardware maker ebbed 11 cents, or 3.3%, to $3.21 in afternoon trading.

Sun's postearnings conference call Wednesday night featured some unusually blunt questions about how the company plans to turn around its lagging business. Among other things, analysts wondered why Sun suffered a revenue miss at a time most other tech outfits have managed to meet Wall Street's sales expectations.

Said one analyst, in an interview with


, "One thing that struck me was that despite what they're doing on the cost management side, their product sales declined 16% from last year. That compares to


system sales down 1% and


storage products up about 3% year over year."

"Basically their historical strengths have fallen off a cliff as


and Linux solutions get more and more viable," said the analyst. "I think that's going to outweigh all their new growth initiatives."

"My take on the

relative underperformance is that it's because Sun is still married to proprietary Unix," he added. "It's still a Solaris shop, and that market is declining. I don't think management's answers were answers at all. They talked about growth into Linux, how that opens up Unix. Well, Linux is a competitor to Unix."

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Sun reported break-even earnings, as expected, but sales fell more than $100 million short of expectations.

Sales in the March quarter totaled $2.79 billion, 5% below the consensus estimate of $2.93 billion.

Net income was $4 million, or break-even on a per-share basis, according to generally accepted accounting principles.

While EPS has marginally improved from last quarter's penny loss, revenue remains 10% below the level of the same quarter in 2002. With the exception of a one-time profit in the June 2002 quarter, Sun hasn't been in the black since the March 2001 quarter.

By way of guidance, CFO Steve McGowan said the company has historically seen anywhere from 20% sequential sales growth to a 2% drop-off in revenue in the fiscal fourth quarter now underway. "We won't give you a percentage, but we would expect growth in Q4," he said.

McGowan explained that sales in the just-ended quarter started off decently, but softened for about six weeks in the middle before strengthening toward the end. Customers were particularly wary about making larger purchases like data center products, he said.

Referring to the sales miss, CEO Scott McNealy said half-jokingly, "We want credit for not blaming SARS or the war."

Pointing to progress on cost-cutting, Sun said Thursday it has reduced SG&A expenses by almost $200 million year-over-year. Last fall, the company announced layoffs amounting to 11% of its workforce.

In a statement, McGowan said, "Our significant cash and marketable securities balance of over $5.5 billion and demonstrated ability to continue generating cash are solid evidence of Sun's financial strength."



shot higher after beating Street expectations on sales and earnings and issuing strong guidance. The stock tacked on a fat $2.30, jumping 16.4% to $16.35.



(AMD) - Get Report

shares inched up after the company

posted another in a long series of quarterly losses. Shareholders were pleased with the size of the loss and stronger-than-expected revenue. The stock gained 10 cents, or 1.3%, to $8.