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Sun Microsystems (JAVA) shares this morning are down sharply to their lowest level since 1995, following a bearish note on the company from Caris & Co.’s Shebly Seyrafi, who cut his price target on the stock to $10.50 from $14.50 “to reflect lower margins following checks indicating that JAVA was aggressively pricing its products in [the fiscal fourth quarter] and to reflect the company’s challenging outlook.”

Sun reports results for its fourth quarter ended June on August 1. The company previously guided to flat revenue with an increase in margins. Seyrafi today actually raised his revenue estimate slightly to $3.85 billion from $3.82 billion, which is a bit above the consensus of $3/8 billion, but trimmed his EPS estimate to 31 cents from 35 cents (which is still above the Street consensus of 27 cents) to reflect lower margins.

Seyrafi writes that the company’s outlook remains “challenging,” asserting that “customers are starting to defer purchases of high-end equipment” such as Sun’s servers.

Meanwhile, the company reportedly has announced 212 layoffs at two facilities in Colorado. Seyrafi notes that the company has already announced plans to cut 1,500-2,000 jobs by fiscal Q2, reducing operating expenses by $100 million to $150 million. Seyrafi says the company had an all-hands meeting July 10 to discuss headcount reduction and to discuss reorganizing the company from 5 division to 2-3 divisions.

For the September quarter, Seyrafi sees revenue of $3.22 billion, in line with the Street, but with non-GAAP profits of just 5 cents a share, below the Street consensus of 12 cents. For the June 2008 fiscal year, Seyrafi now sees profits of 90 cents, cents, down from 94 cents. For FY ‘09, he goes to 89 cents a share, down from $1.06.

JAVA today is down 52 cents, or 5.32%, to $9.25.

UPDATE: Also this morning, First Global analyst Amitabh Goel resumed coverage of the company with an Underperform rating. Goel sees Q4 revenues of $3.791 billion and non-GAAP EPS of 17 cents. He notes that at 13.7x FY ‘08 earnings, the stock’s valuation is “fairly high, considering the company’s dismal performance. “Although management has said that JAVA continues to witness decent order growth in the markets outside the U.S., there are signs of a slowdown in Enterprise IT spending in these markets as well, which could impact the company’s revenue growth. In view of the murky picture, we believe that JAVA is likely to face some serious challenges ahead.”

Previously: I’ve been writing a lot about Sun this week:

I’d especially suggest reading through the extensive reader comments on the July 9 post, which includes the thoughts of many current and former Sun employees; while a few are supportive of the current management team, many are angry and blame current CEO Jonathan Schwartz for the company’s current woes.