April 3, 2007 2:06 PM PDT

Sun speeds UltraSparc, but some analysts see trouble

Sun Microsystems announced faster UltraSparc IV+ processors on Tuesday, just in time to address analyst concerns this week that the company's high-end servers had a sour quarter.

The UltraSparc IV+ has led something of a comeback at Sun, with the company recouping some of the market share it had lost to rivals in the years after the dot-com bust. The new processors run at speeds of 1.95GHz and 2.1GHz, compared with earlier models at 1.8GHz.

In the quarter ended December 31, UltraSparc server revenue increased 18 percent, one of a series of relatively strong quarters for the product family. But two analysts this week said it looks like the momentum has faltered, based on discussions with Sun sales channel partners.

"Our channel checks suggest that Sun's fiscal third quarter (which just finished at the end of March)--especially in the U.S.--was weaker than prior quarters, especially in high-end servers and storage," Toni Sacconaghi, a Sanford C. Bernstein analyst, said in a Monday report. "We continue to believe that Sun's goal of 10 percent operating margins is not a slam dunk and that recent server momentum may be difficult to sustain."

Sacconaghi, who downgraded Sun from "market perform" to "underperform," also believes Sun is being hurt by not having servers using Intel's newer dual-core and quad-core Xeon processors, models the company plans to add by the end of June.

Merrill Lynch analyst Richard Farmer still sees Sun as "an attractive turnaround story," but also voiced concerns Monday. "Despite a solid first month, our preliminary checks indicate Sun struggling to sustain last year's momentum in the balance of its seasonally weak March quarter," Farmer said. "Higher-end servers sound more than seasonally weak while the low end appears stronger."

Sun has numerous Sparc changes in store. In the first half of the year, it will introduce the most direct successor to the UltraSparc IV+ line, brand-new "Advanced Product Line" models co-developed with Fujitsu and using Fujitsu's Sparc64 processor.

Next come new variations in Sun's own line. The company's current eight-core Niagara chip can juggle 32 tasks at once, but the Niagara 2 will double that to 64. The first Niagara 2 systems are scheduled to arrive in the second half of the year, with dual-processor Niagara 2 models slated for the first half of 2008.

Sun's higher-end cousin to Niagara, a 16-core chip code-named Rock, will arrive in the second half of 2008.

See more CNET content tagged:
Sun UltraSPARC, Sun Microsystems Inc., momentum, Intel Xeon, Fujitsu

3 comments

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Torpid jouranlism
Is this a product announcement or a Wall Street rant? I can't tell. Sheesh. Cnet can't even devote two articles to such (respective) emptyness anymore. Not an ounce of insight from either perspective. Snore.
Posted by scdecade (329 comments )
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Typical article, but could use more depth
I would not criticize the article too much. This is typical journalism. Take good news and and the "but". It annoys me the tech press does this same crap, but I am used to it.

What I would like to see is more digging into why the fall-off in Sun sales? Did Sun drain its pipeline by pulling in all their orders? Is the slowdown in CAPEX spending hitting big-ticket IT items?

That Sun had a good Q4 of the 2006 calendar year is impressive, given that is IBM's fiscal year end. So I find the idea that Sun pulled in deals somewhat unlikely.

Perhaps the slowdown this quarter was due to customers waiting for these new processor speed bumps.

Most likely though, I think there is a down cycle of big-ticket IT spend right now. The proof would be if channel checks are showing a slowdown of other vendors as well.
Posted by meh130 (145 comments )
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Runs Windows, Unix, Linux &#38; Mac OSX on ONE computer with
EIGHT 3.0 GHZ Intel Xeon cores ( 2 quad core chips )

smokin'!
Posted by Llib Setag (951 comments )
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