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Sun Microsystems (Nasdaq: SUNW) was down US$1.81 at $20.44 Wednesday morning following reports that Merrill Lynch & Co. downgraded the stock, because of concerns that the slowing economy could hurt demand for Sun's products.
Merrill analyst Thomas Kraemer reportedly downgraded the Palo Alto, California-based software maker to neutral from accumulate, saying inventories are at the highest level in three years.
Sun shares are down from a 52-week high of $64.66, reached in September. The stock, along with others in the technology sector, has fallen amid concern about a downturn in corporate spending on technology and software.
Sun officials are holding a quarterly conference call after the close of trading Thursday, and some investors are reportedly expecting them to use the call to issue a lowered outlook for the coming quarter.
In the last fiscal quarter, Sun beat analyst estimates and said revenue rose 19 percent despite a slowdown in U.S. personal computer sales. Chief executive officer Scott McNealy called it "an outstanding quarter."
Sun recently unveiled software designed to allow users to access files not only from work, but also from home via a personal digital assistant (PDA) or cell phone. Analysts said the new Sun Open Net Environment (Sun ONE) Webtop is a rival to Microsoft's (Nasdaq: MSFT) .NET products.
Sun said that Sun ONE products are based on an open architecture, including Java
and XML. Sun ONE Webtop is currently in beta testing and is expected to be
available by the end of the first quarter. The Microsoft .NET products are due
out later this year.
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