Goldman Sachs Defends Sun Micro (SUNW)

From Notable Calls

- Goldman Sachs notes Sun Micro (NASDAQ: SUNW) shares are down 9% since their recent peak on March 20 versus the S&P 500 which is up 0.6%. The fear is that Sun missed the quarter and will therefore head into its fiscal year-end quarter on weakness. Firm disagrees. While March quarters in the US were unusually backend-loaded for their enterprise hardware names, they think Sun's came together both on the direct and indirect sides of the business, putting Sun in a position to achieve well-above the company's 4% operating margin target exiting the fiscal year.

Investor sentiment has been noticeably skittish on Sun. Investors are nervous about the quarter, projecting that further into questions about Sun's ability to sustain margin improvements. GSCO's checks suggest that Sun had a strong finish to the March quarter, strong enough to at least hit the low end of the company's target range. Checks also point to strong and building business activity for fiscal 4Q, including improvements in high-end box sales which should help margins. After making it through the difficult March quarter mostly unscathed and heading into its fiscal year end, Sun shares should recapture their recent slide and begin to move toward firm's $7.50 12-month tgt.

Notablecalls: The stock is about about 5-6 cents in pre mkt trading but I would not be surpised to see some more buy interest over the week or so.

For more calls go to http://notablecalls.blogspot.com

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