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Intel, Sun Micro suggest rebound

Sun Microsystems Inc and Intel Corp tomorrow will hold their midquarter sales updates, and investors say they're looking for signs to justify the surge of more than 60 percent in both stocks in the past two months.

Intel, the biggest computer-chip maker, may say revenue is coming in toward the high end of its targets, analysts said. Sun is likely to say business is improving from earlier this year, though the server maker probably won't encourage analysts to raise their sales forecasts as it works to recover from a steep revenue drop.

Economic growth stalled late last year, and the US slid into a recession in March. As corporations and consumers pared spending, equipment makers from Intel and Sun to Dell Computer Corp and Hewlett-Packard Co have slashed jobs and cut expenses. Now, shareholders are trying to judge how much of a sales boost will come in the holiday season and whether any revival will last.

"Sept. 11 really spooked a lot of people," said Sunil Reddy, a fund manager at Fifth Third Bancorp, which owns Sun and Intel shares and has US$30 billion under management. "People expected business to be just over the cliff. The fact that it's not is warming to some people." Sun shares have added 69 percent since Oct. 1, while Intel has gained 64 percent. That compares with a 10 percent rise for the Standard & Poor's 500 Index.

Sun will give investors a first glimpse at fiscal second-quarter demand, after declining to give a forecast for the December period when it reported first-quarter earnings in October. The server computer maker is expected to lose US$0.04 a share, excluding certain costs, on revenue of US$3.09 billion, the average analyst estimates in a Thomson Financial/First Call survey.

"We're hoping that we get some guidance [and] that there's some momentum either in orders or in outlook," said Larry Jones, chief investment officer of NCM Capital Management Group, which owns more than 1.5 million Sun shares. "We certainly don't want to hear there is no visibility." Palo Alto, California-based Sun had net income of US$0.12 a share in the year-earlier period, when sales reached a record US$5.12 billion.

Sun's revenue, which soared in the late 1990s as Internet startups snatched up the company's machines to run their Web sites, sank when many dot-coms failed and venture-capital funding dried up. Shareholders said they're eager to know if sales will stabilize soon.

After posting sales of US$18.3 billion in fiscal 2001, the company is expected to generate just US$12.9 billion this year, according to First Call.

"If sales are up, everything takes care of itself, but they're still under a lot of revenue pressure," said Bill Rutherford, whose Rutherford Investment Management recently sold its Sun stake.

Santa Clara, California-based Intel may raise its sales forecast to "at least" the upper end of previous targets, Morgan Stanley Dean Witter analyst Mark Edelstone wrote in a note to clients Monday. The company in October predicted revenue of US$6.2 billion to US$6.8 billion, and Chief Financial Officer Andy Bryant has said since then that demand is strong.

Analysts expect a profit of US$0.09 a share, before some expenses, on sales of U$6.57 billion, according to a First Call survey.

A year earlier, Intel's net income was US$0.32 on US$8.7 billion in revenue.

Demand for Pentium 4 personal-computer processors is stronger than expected, especially for mid-priced PCs, analysts said.
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