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Technology Stocks : SUN microsystems: 7/18/96 quarterly report - BIG!
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To: carlos jeanpierre who wrote (256)8/21/1996 5:45:00 PM
From: Joe Rizzo   of 386
 
Carlos, interest does seem to be waning. But I think the evidence strongly suggests that people should be getting excited. Based on backlog and strong orders of last quarter, this quarter will beat estimates by at least a dime. The analysts still adhere to this excessive seasonality theory about Sun's business. It is just less and less the case, especially in light of outstanding orders last quarter.

I think Sun stands to benefit more from component prices falling than even Dell. Sun machines ship with much more memory and storage. Further server, software, and server business continues to grow faster than basic workstation biz. These are all higher margin businesses.

Finally, people still ascribe little value to Java. What do you think Microsoft would pay for Java? Today's announcements just reinforce the momentum of Java. I remember when I used to read computerworld and Byte two years ago I was hard pressed to find one Sun article. Now there are dozens. Java is simply taking off, and in the next three years between tools, added support biz, licensing, etc will contribute tens if not hundreds of millions of marginal net income dollars. The fact is you can buy Sun for 15.5 times conservative calendar 1997 EPS estimates. With the company's pristine balance sheet and diversified business, I believe the lowest possible level is 14 times $3.50 or $49 in 1997, while the upside is 20 to 22 times 3.50 or $70 to $77.

Joe Rizzo
JMR Trading
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