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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank
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To: Rick Buskey who wrote (118901)12/13/2000 4:51:03 PM
From: Lane Hall-Witt   of 120523
 
Richard -- SUNW: I think the discounting SUNW has begun to engage in is probably foreshadowing the "commodification" you're talking about here. The Pentium 4 is seen as a particular threat in some circles, because it shows that INTC is working its way up the performance food chain -- which is a sure sign that the mid-range server market is going the way of the low-end server market. SUNW needs a cost-effective processor breakthrough if it wants to keep some distance between itself and the world of the P4.

That said, I don't think SUNW is likely to suffer as much as the other box makers, because it really doesn't have the extreme low-end exposure that comes with selling retail. For now at least, the enterprise market seems to be holding together better than the consumer market. Its most intense direct competitors are IBM and HWP, which both have strong offerings in the Unix space, and neither of these companies is eager to destroy the premiums available in the server market by starting a zero-margin pricing war. The real wildcards in the server wars are the P4 and Win2000. Long term, I also like SUNW's potential for diversification: the storage space, Java, Jini, etc., etc.

I'm looking to buy a load of SUNW at some point -- I just don't know when. I wouldn't be surprised to see it do what ORCL did a few weeks back, when ORCL kept drifting lower and lower through support level after support level.
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