MOST NOTEWORTHY: Staples, Evergreen Solar and Genzyme were today's noteworthy upgrades:

• Jefferies upgraded shares of Staples (NASDAQ: SPLS) to Buy from Hold following the company's raised bid for Corporate Express based on the increased chance the deal gets deal done and SPLS achieves meaningful EPS accretion.
  
• Jefferies also raised Evergreen Solar (NASDAQ: ESLR) to Buy from Hold on valuation, as they believe concerns regarding capital needs are now priced into the stock and that the company continues to take risk out of its growth story through execution.
  
• Bernstein upgraded Genzyme (NASDAQ: GENZ) to Outperform from Market Perform citing increased confidence in GENZ's product portfolio, geographic and therapeutic diversification, improved outlook, and valuation.

OTHER UPGRADES:

• Sun Microsystems (NASDAQ: JAVA) was raised to Outperform from Market Perform at Wachovia.
  
• BearingPoint (NYSE: BE) was upgraded at Goldman to Neutral from Sell.
  
• Lehman upgraded Nexen (NYSE: NXY) to Overweight from Equal Weight.

MOST NOTEWORTHY: Dynamic Materials, Allergan and Sun Micro were among today's noteworthy downgrades:

• Dynamic Materials (NASDAQ: BOOM) was downgraded to Neutral from Overweight at J.P. Morgan following the Q1 report based on margin risk from steel costs and availability.
  
• Allergan (NYSE: AGN) was downgraded to Hold from Buy at Jefferies ahead of the Q1 report on May 7 based on potential deceleration in Botox and breast implants, which could result in multiple contractions.
• Sun Microsystems (NASDAQ: JAVA) was downgraded to Peer Perform from Outperform at Bear, citing the disappointing earnings report for the downgrade.

OTHER DOWNGRADES:

• ManTech (NASDAQ: MANT) was downgraded to Neutral from Outperform at Cowen based on valuation and expectations for decelerating growth in 2H08.
  
• Silver State Bancorp (NASDAQ: SSBX) was downgraded to Sell from Hold at Sandler O'Neil.

Sun Microsystems, Inc. (NASDAQ: JAVA) will be buying open-source database software company MySQL AB for about $1 billion, both companies announced this morning. MySQL, based in Sweden, makes a very popular database application used by global nameplates we all recognize such as Google (NASDAQ: GOOG), Nokia Corp. (NYSE: NOK) and Facebook, Inc.

The deal includes an $800 million cash payment by Sun and $200 million in options to arrive at the billion-dollar total. MySQL CEO Marten Mickos said "Sun's culture and business model complements MySQL's own by sharing the same ideals that we have had since our foundation -- software freedom, online innovation and community and partner participation."

Sun's movement into the open-source software universe recently has signaled a huge shift in its strategy under current CEO Jonathan Schwartz.

Although Sun Microsystems, Inc. (NASDAQ: JAVA) is a leading global supplier of networked computing products, its recent history of profitability has seen its share of ups and downs. CEO Jonathan Schwartz, who is famous in the business world for his corporate blog, continues to bet the company's future on open-source software support and storage hardware.

It's working in some form, as the company reported $89 million in net income in its first fiscal quarter, starting its first string of four consecutive profitable quarters in more than 5 years.

Much of that is due to corporate belt-tightening more than gobbling up tons of sales and seeing results of strategy shifts after company co-founder Scott McNealy left the CEO position a few years ago. Still, sales have slowly gained steam as the company has ramped up its share of the computer server and storage business. It's been fast enough for most investors -- just not all.

To prop itself up in the markets, Sun performed a 1-for-4 reverse split back in December after a 16% price decline in 2007 alone. It's unclear if Sun can make enough money moving forward with the open-source strategy it now has with its Solaris software and Java software, and whether support on that software combined with hardware sales can make for future profit growth once cost cutting sees a slowdown.

MOST NOTEWORTHY: Ericsson, Total SA, Research in Motion, MasterCard and Sun Microsystems were today's noteworthy upgrades:

• Goldman upgraded shares of Ericsson (NASDAQ: ERIC) to Buy from Neutral and added the company to their pan-Europe Conviction Buy List, as they believe the factors that lead to the October earnings miss will be rectified and the company will report upside to Q4 estimates.
  
• Credit Suisse upgraded Total SA (NYSE: TOT) to Outperform from Neutral based on valuation and expectations for a return in upstream volume growth in 2008.
  
• Credit Suisse also upgraded Research in Motion (NASDAQ: RIMM) to Outperform from Neutral, citing RIMM's expanding international market share.
  
• MasterCard (NYSE: MA) was raised to Buy from Hold at Deutsche Bank, as they believe the company's margin potential is yet to be fully priced into shares or Street estimates.
  
• Citigroup raised shares of Sun Microsystems (NASDAQ: JAVA) to Buy from Hold to reflect the company's improving product line, restructuring, and share buyback. They find the risk/reward attractive and expect solid Q2 results.

OTHER UPGRADES:

• Goldman added Oracle (NASDAQ: ORCL) to its Conviction Buy List.
  
• Citigroup upgraded American Eagle (NYSE: AEO) to Hold from Sell.
  
• KeyBanc raised its rating on Comstock Resources (NYSE: CRK) to Buy from Hold.
  
• Millennium Pharmaceutical (NASDAQ: MLNM) was upgraded to Outperform from Neutral at Cowen.
  
• Roth Capital upgraded Gevity HR (NASDAQ: GVHR) to Hold from Sell.

MAJOR PAPERS:

• With its reputation at stake, Countrywide Financial Corporation (NYSE: CFC) has launched an aggressive PR offensive beginning inside the firm, reported the Wall Street Journal (subscription required).
• Barron's Online's (subscription required) "Inside Scoop" section reported that on Friday, two days after the stock dipped to $12.07, a 6-year low, Borders Group Inc (NYSE: BGP) CEO George Jones bought 50K shares, his first open market purchase since joining the retailer.
• The Financial Times (subscription required) reported that Citigroup Inc (NYSE: C) CEO Chuck Prince is waiting for a review of the company's $3.3B in losses and writedowns in its banking business for Q3 before deciding whether to fire executives as a result of the poor performance, according to senior Citigroup executives.
• Yahoo Inc (NASDAQ: YHOO) said it was considering selling Kelkoo, the online shopping comparison service that it acquired in 2004, admitting the acquisition did not pan out as planned, reported the Financial Times.

WEBSITES:

• Sun Microsystems (NASDAQ: JAVA) is going to combine its storage and server product teams to create a new converged group called the Systems team, Sun Microsystems CEO Jonathan Schwartz wrote in his blog.
• Henry Blodget made a case for Google's (NASDAQ: GOOG) stock going to $2,000 a share at AlleyInsider.com.

Sun Microsystems (NASDAQ: JAVA) has been on a wild ride in recent years. The company has been battered in the corporate space as cheaper hardware and operating system alternatives (like Linux) cropped up and stole profitable market share from the Silicon Valley stalwart. When company founder Scott McNealy handed the reins over to then-CEO Jonathan Schwartz, many investors did not know what to think. By now, they probably do.

Sun has delivered profitability for three straight quarters after making its once-proprietary Solaris operating system an open-source product, and it's mirrored a good deal of IBM's move to a revenue model built on services instead of software and hardware. With computer server hardware still rapidly moving into the commodity stage (if it's not there already), this move could not have come any sooner for Sun. Schwartz knew it, and acted in time.

Schwartz presented Sun's plans for cost initiatives and growth plans for the new fiscal year early this morning in New York City while many investors and Sun pundits watched and listened with a careful and scrutinizing eye (and ear). With Sun shares up over 6.5% in just the last week, what was the chatter from today's announcement? The meeting began at 8am EST today, and transcripts and audio downloads are available here.

MAJOR PAPERS:

• With his company's stock near a 52-week low, Robert Willett, CEO of Best Buy Incorporated's (NYSE: BBY) international operations, bought nearly $500K in stock, reported Barron's Online's "Inside Scoop" section.
• In a rare instance of a foreign company being allowed into the Chinese onshore oil and gas industry, Chevron Corporation (NYSE: CVX) will develop a natural gas filed owned by PetroChina Company Limited (NYSE: PTR), reported the Wall Street Journal.
• The Wall Street Journal reported that Sun Microsystems Inc (NASDAQ: SUNW) is today expected to introduce a new microprocessor called UltraSparc T2, will be able to process up to 64 threads at one time -- most chips can handle up to four threads at a time.
• According to the Financial Times, citing a source familiar with his pay package, Robert Nardelli will college a salary of $1 a year in his new role as CEO of Chrysler, which is 20% owned by DaimlerChrysler (NYSE: DCX).

OTHER PAPERS:

• The New York Mercantile Exchange (NYSE: NMX) is quietly selling its lower Manhattan headquarters, asking for between $600M and $700M, ahead of a deal to sell itself, reported the New York Post.

Sun Microsystems Inc (NASDAQ: SUNW), the networking computing company, reported impressive cash generation metrics last night, while sales continued to be light.

For the June 2007 fiscal year, Sun generated $1.2 billion in operating income and cash flow from operations of $950 million -- a vast improvement. Gross margin also improved 200 basis points for the year and almost 400 basis points from last year's Q4.

The problem at Sun continues to be revenue growth, as there was little year-over-year growth in the current quarter and the company is guiding to low-to-mid single digit revenue growth for the year -- which is not a good sign for a technology company. Also, the company provided no guidance for the upcoming quarter, leaving much of the growth to the tail end of FY 2008, which typically is not good.

Sun announced that it will host its analyst day in New York on September 5 and mentioned that it will discuss its capital structure, which is not a subject that is typically highlighted, a sign something more dramatic might happen with the $5 billion in balance-sheet cash.

Overall, Sun has little downside risk and has a private equity investment via a convert priced in the $7 price range. The computer-is-the-network company appears it might be setting itself up for a private equity deal with its focus on higher margin businesses and better cost controls.

MOST NOTEWORTHY: Staples, Inc (SPLS), Sun Microsystems, Inc (SUNW), Forest Laboratories, Inc (FRX), AvalonBay Communities (AVB) and ConocoPhillips (COP) were today's noteworthy upgrades:

• Soleil upgraded shares of Staples, Inc (NASDAQ: SPLS) to Buy from Hold following the in-line Q1 results, as the firm believes management's initiatives will benefit the company for the remainder of the year.

• Matrix upgraded Sun Microsystems (NASDAQ: SUNW) to Hold from Sell based on improved profitability and margins due to cost cuts.

• First Albany upgraded Forest Laboratories (NYSE: FRX) to Strong Buy from Neutral following positive preliminary results for Milnacipran in Fibromyalgia.

• AvalonBay Communities (NYSE: AVB) was raised to Market Perform from Underperform at BMO Capital based on valuation.

• Bernstein upgraded shares of ConocoPhillips (NYSE: COP) to Outperform from Market Perform...

OTHER UPGRADES:

• Piper Jaffray upgraded Medtronic, Inc (NYSE: MDT) to Outperform from Market Perform.

• Advanced Analogic Technologies Incorp (NASDAQ: AATI) was upgraded to Buy from Hold at Needham.

• CIBC raised Cypress Bioscience, Inc's (NASDAQ: CYPB) rating to Sector Outperformer from Sector Performer.

• HSBC upgraded Agnico-Eagle Mines Ltd (NYSE: AEM) and AngloGold Ashanti Ltd (NYSE: AU) to Overweight from Neutral.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Sun Microsystems Inc (NASDAQ: SUNW) reported light results last night, blaming weakening enterprise demand at quarter's end for the revenue shortfall. Gross margins came in at 44.5% versus expectations of 45.2%.

I think it is too early to jump into Sun's stock. Sun acquired a company called StorageTek a few years ago which contributes a lot of revenue for the server manufacturer, this business will also show weakness as demand for enterprise technology continues to weaken.

Sun also raised a boat load of capital recently from private equity, most likely to be used for a large acquisition. Typically, Sun's business does not turnaround quickly. I'd wait for revenue and some news on what it is going to do with all this cash before getting into this stock.

MOST NOTEWORTHY: FedEx Corp (FDX), National City Corp (NCC), Sun Microsystems, Inc (SUNW) and M&T Bank Corp (MTB) were some of today's noteworthy downgrades:

• FedEx Corp (NYSE: FDX) was downgraded to Hold from Buy at Citigroup and lowered their target to $120 from $132 to reflect expectations for slower earnings growth in the next few quarters combined with ongoing uncertainty on the timing of an economic recovery. The broker recommends putting new money into United Parcel Service, Inc (UPS).

• AG Edwards cut National City Corp (NYSE: NCC) to Sell from Hold. The firm believes upside is limited at these levels and weak EPS growth trends are likely to put some pressure on National City's valuation.

• Bernstein downgraded Sun Microsystems Inc (NASDAQ: SUNW) to Underperform from Market Perform, as checks indicate Q3 may be weaker than prior quarters and could disappoint given investors' high expectations.

• Oppenheimer cut M&T Bank Corp (NYSE: MTB) to Sell from Neutral following the company's Q1 pre-announcement.

OTHER DOWNGRADES:

• Jefferies downgraded Blackbaud, Inc (NASDAQ: BLKB) to Hold from Buy with a $25 target due to channel checks that suggested the company has not launched its new product Bulls Eye in Q1 with any major effort.

• Stifel downgraded Deere & Co (NYSE: DE) to Hold from Buy, citing valuation, the potential overhang from the record corn crop/ethanol glut, seasonally normal crop prices and DE stock, sluggish construction and forestry results in the housing recession.

• JP Morgan downgraded Kronos Inc (NASDAQ: KRON) to Neutral from Overweight based on its pending acquisition.

• Stephens cut Sanderson Farms, Inc (NASDAQ: SAFM) to Equal Weight from Overweight based on valuation.

• Goldman Sachs downgraded Ethan Allen Interiors Inc (NYSE: ETH) to Sell from Neutral.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Today, Nokia Corporation (NYSE: NOK) and Vodafone Group (NYSE: VOD) announced their collaboration on the development of S60 software on Symbian OS, with the release of the first Vodafone specific software package to all S60 licensees.

Yesterday, Comverse Technology Inc (OTC: CMVT) announced the expansion of its Converged Messaging portfolio with the launch of Comverse Instant SMS, which combines the worlds of SMS and Mobile Instant Messaging, or MIM.

Additionally, Openwave Systems Inc (NASDAQ: OPWV) is launching a whole line of new products.

2007 and 2008 will be the battle between handsets and smartphones, those with the best software will win out. Wireless service providers have been slow to bring PC functionality to handset devices for fear of losing control of the handset. In the PC business, Microsoft Corporation (NASDAQ: MSFT) and Intel Corporation (NASDAQ: INTC) make all the money, with little left over for anyone else.

This means industry consolidation in the wireless software market is about to begin. Look for everyone to start making wireless software acquisitions, either acquiring or partnering, with Openwave, Comverse and Symbian. Also look for the big software companies like Microsoft and Sun Microsystems Inc (NASDAQ: SUNW), with its Java platform, to get into the M&A spirit.

Sun Microsystems Inc (NASDAQ: SUNW) held its annual investor's day with the investment community yesterday. Analysts seemed not to share Jonathan Schwartz's, CEO of Sun, enthusiasm for where the company is headed.

Here are some opinions from analyst reports which were posted on Barron's Tech Trader Daily:

Richard Gardner of Citigroup believes Schwartz continues to adopt the view that Sun's decision to open source its entire software stack will drive developers and users to its platform(s), eventually creating opportunities to monetize R&D investments. Gardner agrees with the premise that volume drives value, but how much value, for whom and over what time period is still unclear.

Thomas Weisel analyst Kevin Hunt still has concerns regarding the "lackluster" storage business (tape market and integration of StorageTek), and as a result, maintains a Market Weight rating on Sun's shares.

Deutsche Bank's Chris Whitmore believes that Schwartz and his team are driving operational and product line improvements, but that this is more than reflected in Sun's shares. Whitmore believes Sun's operating margin goal requires double digit revenue growth through F09, and maintains a Hold rating with a price target of $5.50.

Goldman Sachs's Laura Conigliaro said, "There are significant execution elements to be hurdled and timing could be lumpy."

While analysts reports are peppered with optimistic caveats, they are few and far between. Also, analysts and investors are still questioning the reasoning behind the convertible bond offering with KKR.

Sun's stock has had a massive rally recently, it might be time to take some profits.

Sun Microsystems Inc (NASDAQ: SUNW) reported a solid 7% increase in revenue for its second quarter, citing good demand for its SPARC chip multithreading servers and x64-based servers as well as the increased acceptance of the Solaris 10 Operating System.

More importantly in the tech world, the company showed strong gross margins, coming in at 45%, up from 43% last year.

Sun generated cash from operations of $153 million and had cash and marketable securities at the end of the quarter of $4.8 billion, a lot of cash.

However, despite good cash generation, improved margins and a strong balance sheet, Sun decided to go forward with a $750 million convert with KKR. During the earnings conference call, analysts could not figure out why Sun did the deal.

Jonathan Schwartz, Sun's CEO, said the KKR transaction will allow it to better explore strategic opportunities. He added there could be some cross selling opportunities between KKR's portfolio companies and Sun. Analyst did not appear to believe him.

The reality is the only reason for Sun to need this extra cash is to make a sizable acquisition. Despite an improved operating performance, the growth metrics for Sun, especially within the US, are still weak.

Look for Sun to do another big transaction this year.