Wall Street Beat: Sun hypes, Lexmark implodes

Sun's stock is up after it detailed partnership with Google, Lexmark cites lower demand for supplies, aggressive pricing competition

Shares of Lexmark International Inc. (ticker symbol LXK on the New York Stock Exchange) plunged Tuesday to close down 29 percent after the printer maker warned that its third-quarter financial results were grim. Lexmark fell vastly short of expectations: per-share earnings were half what it had forecast earlier, and revenue, rather than growing slightly, declined at least 4 percent from last year's third quarter.

"Like a cheap knockoff toner cartridge, Lexmark isn't producing the razor-sharp performance that investors used to expect," columnist Stephen Simpson wrote on the Motley Fool Web site for investors. Lexmark blamed its shortfall on lower customer demand for printer supplies and aggressive price competition, and said it expects those conditions to persist though the fourth quarter. Wall Street reacted by casting Lexmark aside like a cheap, outdated printer: Lexmark shares fell from Monday's close of US$60.94 to $43.50 at the end of Tuesday trading. The slide continued as the week wore on. Lexmark finished Thursday at $43.27.

Sun Microsystems Inc.'s stock surged Monday after the company hinted it would announce a sweeping partnership with Google Inc. the next day. Sun's shares (SUNW on the Nasdaq) ended Monday at $4.19, a 7 percent gain on Friday's close.

Investors and industry analysts deemed the actual deal a letdown, though, when it was revealed on Tuesday: Sun will distribute Google's toolbar with downloads of its Java Runtime Engine. No announcement was made of a widely expected agreement for Google to distribute Sun's StarOffice productivity suite or its open-source cousin, OpenOffice.org -- an alliance that could shake Microsoft's grip on the market for office applications suites. Sun shares rose a penny Tuesday to close at $4.20. Google's shares (GOOG on Nasdaq) dwindled a bit throughout the week, declining 2 percent from Monday's $318.68 close to end Thursday at $312.75.

Several major vendors announced acquisitions during the week, as Check Point Software Technologies Ltd. agreed to a $225 million buyout of open-source intrusion detection software developer Sourcefire Inc. and analytics software maker Business Objects SA agreed to pay $40 million to buy information visualization software developer Infommersion Inc.

Check Point announced the Sourcefire deal on Thursday, when it also previewed its third-quarter results, which will be announced in full later in the month. The Redwood City, California, security technology company expects revenue of around $140 million and per-share earnings of $0.31 to $0.32, on the lower end of what it had previously projected. The company's shares (CHKP on Nasdaq) ended Thursday down 9 percent, at $21.50.

Meanwhile, Business Objects' Infommersion deal barely moved its shares (BOBJ on Nasdaq), which gained $0.06 over the previous day's close on Tuesday, when Business Objects announced its acquisition deal. Its stock ended Tuesday at $35.06.