As the sun sets tonight (depending on your latitude), another Sun (NASDAQ:SUNW) rises -- the kind that sells UNIX servers and related paraphernalia -- armed with a full-year earnings release. Is the future so bright you gotta wear shades, or will there be a total eclipse of the stock? Let's find out.

What analysts say:

  • Buy, sell, or waffle? Nineteen analysts cover the Sun these days. Seven of them want to buy, four are looking to sell out, and the other eight are simply holding on. In our Motley Fool CAPS database, it's a two-star stock based on input from 895 investors like you and me.
  • Revenues. The average forecast is for $3.84 billion, essentially unchanged from last year's $3.83 billion. Management guidance outlines a range between $3.77 billion and $3.87 billion.
  • Earnings. Wall Street hopes to see the recently started string of profits continue with a take-home figure around $0.05 per share. A year ago, Sun turned in a $0.02 per-share loss.

What management says:
CEO Jonathan Schwartz runs a blog, where he recently said that this release will represent "a sea change in how Sun communicates with the world," because the results will hit an open-to-the-world RSS feed before being sent through the usual press release services.

Though the time lapse is small -- the newswires get the story just ten minutes later -- Schwartz thinks it's a step towards a better and more equitable market. It will "increase the transparency of our business, fulfill our desire to disseminate information on a fair and equitable basis, and allow the network to be used for what it's intended -- connecting people and information."

"The network is the computer," right?

What management does:
Gross margins have expanded a bit recently, and overall profitability has come a long way over just a few quarters. Even better, Sun has a nice, positive cash flow situation going on, and should break through to positive 12-month net profits this time, barring a moderate disaster.




































All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Along with the last earnings report, Sun announced a $3 billion stock buyback program. That's a significant chunk of the market cap, which stands at $17.6 billion today, though the program will likely take a few quarters to reach full implementation. After all, $3 billion would sap almost all of the company's cash-and-equivalents balance, which stood at $4.1 billion as of that third-quarter report.

Such a large buyback plan says a couple of things to me, particularly because the share count has remained basically flat over the past year -- after years of steady increases. For one thing, Sun feels comfortable with its cash position and is willing to reduce it a bit for the benefit of shareholders. For another, management can't really think of any better way to boost owner returns than by reducing the share count. Which leads us to point number three: insiders think that the stock price is at a serious discount to the company's true value, which is why a buyback should be a good use of cash.

Does this mean that management feels a serious turnaround is about to happen? Last year's cost cuts did bring Sun back to profitability, so there's a solid-looking base of operations from which to launch such a move.

Not sure if the expected market trends are in Sun's favor, though. There's the widely expected round of server upgrades once businesses get around to certify Microsoft's (NASDAQ:MSFT) Windows Vista for production use, but Sun's servers largely run the company's own Solaris operating system, so that's a wash.

Perhaps the promise lies in storage products. A lot of Sun's sales go to media companies that have grown comfortable with Solaris-based production and media management tools, and we all know the explosive digital video growth story. Is that sector-ific advantage enough to beat big boys like Hewlett-Packard (NYSE:HPQ), IBM (NYSE:IBM), and EMC (NYSE:EMC)? Probably not, but I'll keep my shades handy just in case.

Microsoft is a Motley Fool Inside Value selection.

Fool contributor Anders Bylund holds no position in any of the companies discussed here, and his days as a Sun admin are long gone. You can check out Anders' holdings if you like, and Foolish disclosure will help you find the road ahead, even through a pair of Joo-Janta 200 Super-Chromatic Peril Sensitive Sunglasses set to "panic."