According to analyst Sanjiv Hingorani of Salomon Brothers, Sun Microsystems investors could be in for a severe earnings disappointment in 1989. Although revenues at Sun continue to grow at an expolosive rate, margins continue to contract says the report. The general slow down in the workstation market, increased competition from the likes of DEC and Hewlett-Packard, and the rapid expense growth experienced by the company are cited as the contributory factors. Hingorani is sceptical of Sun’s ability to compete in the general purpose commercial markets dominated by minicomputers and personal computers and says the company’s multiple architecture strategy – Intel and Motorola microprocessors as well as its own SPARC – will not endear it to end-users looking for object-code compatibility. Despite revenue growth in 1988, says the report, operating margins declined from 12.9% in 1987 to 10.5% this year. Earnings per share are forecast to expand by 27.4% in 1989, compared with the 61.3% experienced in 1988.
