NEW YORK (CNNfn) - Rays from Sun Microsystems' fourth-quarter earnings results warmed investors Friday, pushing shares up nearly 6 percent.|
At 2:15 p.m. ET, Sun (SUNW: Research, Estimates) rose 5-5/8 to 103-11/16, one of the few stocks trading higher on Nasdaq.
The network-computer hardware, software and services provider reported fiscal fourth-quarter earnings late Thursday of $659.5 million, or 39 cents per share, soundly beating analysts' expectations of 33 cents a share.
"It was a really strong quarter in every aspect," Ed Zander, Sun's chief operating officer, told CNNfn. "We just gave guidance 90 days ago of around 25 percent. So it's pretty remarkable that in 90 days we just upped to push to 30 percent, and that's where we want to stay right now."
The new IBM?
Analysts on the Street were dazzled by the results and effused about the company's efforts in myriad upgrades Friday morning.
Merrill Lynch analyst Steven Milunovich raised his price target to $125 a share, and said the earnings results "suggest that Unix server growth across the industry is accelerating due to a solid Internet build-out. Sun is becoming the new IBM."
"Sun is pulverizing its competition in UNIX servers, extending its lead and strengthening its incumbency with the fastest-growing elements of the enterprise hardware end-market, pure dot.coms and 'Webized' portions of traditional corporations," DLJ analyst Kevin McCarthy said in a research note.
"We are raising our price target to $120 and maintain our 'buy' on the stock. As long as Sun's revenues grow at accelerating rates, Sun's valuation should remain in expansion mode," McCarthy said.
McCarthy also noted Sun's "bulging" backlog at the end of June and believes Sun will post 45 percent revenue growth in the September quarter. He also tacked 5 cents on to his annual earnings estimates for fiscal 2000 and 2001.
"I think, actually, we are going to work our backlog down in this quarter and next quarter and the analysts are working through their numbers right now," Zander said.
DB Alex. Brown analyst Philip Rueppel repeated his "buy" recommendation, raised Sun's price target to $120 a share, and marveled at the company's backlog.
"The company continues to hit on all cylinders with impressive results," Rueppel said in a research note. "The outlook for fiscal 2001 is even more bullish. The backlog is astounding at $1.8 billion and should bode well for results in fiscal year 2001."
PaineWebber's Don Young raised his earnings estimates for fiscal 2001 to $1.32 a share from $1.18, boosted Sun's price target to $130 a share from $115, and reiterated his "attractive" rating.
"There is little question that Sun is rapidly gaining market share, but there may also be evidence of a market turn-up for Internet servers at the same time as a turn down for legacy systems," said Young in a research note. "Sun is the long-term winner in the UNIX category and we still do not see how any UNIX competitor can catch them. Sun is the best-positioned UNIX server vendor, with more than twice the UNIX server market share of any of its competitors."
New product launch
Sun's Zander acknowledged that the company is more than holding its own, but is still hungry for additional market share.
"Business remains very strong. We're in a good position. And if the market share's there, we'll take it. We told Wall Street and told the analysts that in the last year, we were going after market share, and that's what we did in the last four quarters."
Sun may be ahead for now, but Zander said the company can't rest in the face of competitors like Microsoft and its NT offerings.
Zander said Sun soon will unveil three new products, and also spoke about the company's new operating system, Celera. [491K WAV] or [491K AIFF]
"I don't take any competitor lightly. This is what makes Sun really good, is that every day we wake up and we value the competitive threats and we go out and meet them in the marketplace," Zander said.
"But we've heard about NT in '95, '96, '97, '98, '99. They [Microsoft] announced several months ago that it didn't have the scalability and robustness to run the kind of applications we do. And I think with Microsoft's announcement a few days ago and their growth rate -- it was a 1 percent revenue growth -- and talking about NT being slow in businesses, just re-enforces just how far ahead we are with Celera and our security of our operating system."