Peter Henderson
SAN FRANCISCO: Network computer maker Sun Microsystems Inc. denied on Monday
that it faced accounting problems, though analysts questioned the company's
growth prospects.
Palo Alto, Calif.-based Sun said market rumors of problems with its
accounting or the way it books sales were false. The rumors had contributed to a
near 17 per cent decline in Sun's share price over the past four sessions to
Monday.
"Over the last few days, there have been rumors in the market to the
effect that Sun Microsystems, Inc., has experienced 'accounting irregularities'
or 'revenue recognition' problems. These rumors have no basis in fact and are
false," Michael Lehman, Sun's chief financial officer said in a statement.
The denial sparked a partial rebound for the stock in after-hours trade, with
Sun shares rising to $36-1/64 on Instinet from a close of $34.
Sun briefly dipped to $32-5/8 at one point Monday, its lowest level since
December 1999, on a massive volume of 152 million shares, making it the most
active Nasdaq issue.
In the current quarter Sun shares are down 41 per cent, the worst quarterly
performance for the stock in 10 years.
Separately, analysts raised questions about Sun's longer term outlook and
valuation.
Banc of America Securities analyst Kurt King said in a note that he had put
Sun's strong buy rating and $65 price target over 12 months under review but
maintained estimates through next year.
"Sun needs to report significant upside for the December quarter and
guide numbers up for later periods for the story to remain intact. Failing to do
so, this quarter would be viewed as the negative turning point for the
story," he wrote.
King said he expected 49 per cent year-on-year revenue growth to $5.3 billion
in the fiscal 2001 second quarter, ending in December.
Goldman Sachs analyst Laura Conigliaro said that despite Sun's "strong
standing," the brokerage expects short-term upside for the stock to be
limited.
Sun would meet consensus forecasts but was less likely to beat them, at least
through the March quarter, as corporate buyers slow purchases while they try to
get a feel for the macroeconomic environment, she said in a report.
(C) Reuters Limited 2000.