A day after

dropping several unpleasant surprises on Wall Street,

Sun Micro

(SUNW) - Get Report

shares had given up more than one-quarter of their value.

The already besieged stock had dropped another $1.62, trading down 28% to $4.18 in recent trading.

This morning a slew of analysts who follow the company said they have cut estimates for Sun's fiscal 2003, which is already underway.

"While Sun's product lineup is very competitive, without strong demand from its traditional telco and financial verticals the recovery in growth will be modest," said U.S. Bancorp Piper Jaffray analyst Ashok Kumar in a note.

Thursday, Sun guided to a one-cent loss for its first fiscal quarter ending in September, below previous consensus estimates of a one-penny profit. Those results came despite management's earlier insistence that once they became profitable again, the company wouldn't slip back to a loss, said Walter Winnitzki, an analyst at First Albany.

"What makes this even more confusing is that Sun stated it didn't do anything to push sales at the end of Q4, implying it entered Q1 with a healthy carry-over book of potential business," he wrote in a research note out this morning.

Even the company's long-awaited scoring of a quarterly profit couldn't arouse much enthusiasm. In his note, Winnitzki pointed with concern to a 100-basis point drop in product margins that ran counter to management's guidance.

The decline came despite lower component costs and the expiration of an agreement that required Sun to make quarterly payments to

AOL

(AOL)

. Both factors should have helped margins rise.

Sun blamed the unexpected decline on its aggressive pricing tactics amid a struggle for market share.

"The underlying gross margins fell off a lot. You have to take one step deeper and say why," said Winnitzki. "You could say pricing, and I'd agree. But why

did pricing

fall off so much?"

One possibility: Sun has felt pressure to woo customers for its relatively expensive Unix servers, amid fears that lower-priced NT systems are gaining appeal. Not only are the NT systems cheaper, but their performance has recently improved.

Just this week, rival

IBM

(IBM) - Get Report

said some of its customers appeared to be opting for high-end NT servers relative to low-end Unix systems.

"Sun is committed to the Unix marketplace with its Solaris operating system," pointed out Winnitzki, adding that the increasing popularity of NT servers "doesn't bode well for the future."