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Sun Microsystems (JAVA) is expected to report Q4 earnings Friday before the bell with a conference call scheduled for 8:00 am ET.

Guidance

The consensus estimate is 25c for EPS and $3.78B for revenue, according to First Call. Sun pre-announced its results July 15, disappointing investors with sales that fell short of the company's guidance and lower-than-expected profit margins. Sun indicated that revenue will be between $3.73B to $3.8B and EPS from 25c to 35c. The company's gross profit margin slipped to between 44% and 45% of total sales. That disappointed investors because Sun previously predicted it would rise from 44.9% in the January-March quarter. The letdown signaled that Sun is still facing intense pricing pressure.

The company is being hurt by the tottering U.S. economy, which has dampened sales to large corporations and financial institutions, a core part of Sun's business. Sun's profit margins are also being squeezed by fierce competition at both the high end and low end of the server market.

Analyst Views

Wall Street is worried about Sun's ability to meaningfully improve its financial results, as the effects of its cost-cutting efforts wear off and it grapples with a shift toward its cheaper and less profitable servers. Goldman said in a note after Sun's July 15 announcement that the shares gained some ground because the results weren't as bad as some investors had feared and the stock continued to hit new 52-week lows, making the stock a cheap buy.

Key issues for the earnings call: Forward guidance; commentary on margins; and update on the roll-out of Sun's Rock processor which currently is not due out till 2H CY09, behind IBM's (IBM) just rolled-out new POWER6 processor.

Source: Earnings Preview: Sun Microsystems