Investors will be eyeing closely today's mid-quarter conference call by Sun Microsystems. Salomon Smith Barney analyst John Jones wrote to his clients that Sun might lower its own forecasts on the call. Merrill Lynch analyst Thomas Kraemer wrote Wednesday that Sun's inventories are at their highest level in three years. He said that failed Internet-related companies are making used equipment more available and that large customers already have enough of Sun's server computers. Brett Trueman, professor of accounting at Berkeley, says many of other factors that drove the stock market higher during the good times are now creating a vicious cycle downward.
Many companies own stock in other firms.
But lower stock values mean that such portfolios have also turned downward, forcing many companies, including Santa Clara's Intel, to recognize that fall by marking down their own earnings statements. It has yet to write down the value of much of that stock, portending possible future declines in Amazon's stock in the future, Trueman notes. A slew of other effects are hitting home. Now that the value of stock options have declined, companies are being forced to pay employees more cash, Trueman says. That creates a dent in corporate cash flows.