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Technology Stocks : All About Sun Microsystems
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To: Carmine Cammarosano who started this subject1/19/2001 10:20:27 AM
From: Lynn   of 64865
 
ML's latest research comments on SUNW:

"AM Call: NT, MSFT, SUNW, CNXT"

Sun Microsystems (SUNW; 34.88;
B-2-1-9)
Lowering 01E from $0.71 to $0.68; 02E $0.89

 Sun reported EPS of $0.16, in line with our estimate
and consensus. Revenue growth was 44% for the
quarter vs. our estimate of 45%.

 We are reducing our fiscal 2001 EPS estimate to $0.68
from $0.71 and our fiscal 2001 revenue estimate to
$20.9B from $21.8B. For 3Q01, we are reducing our
EPS estimate to $0.16 from $0.17.

 We are also reducing our price objective to $50.

 We would look to become more cautious if we find
either signs of worsening and sustained economic
deterioration or signs that the problems with
UltraSPARC III were not resolved toward the end of
2Q01.

 We're still big believers in Sun management and its
ability to gain share.

 The economic slowdown reduces visibility and raises
the risk that Sun could be the next Dell. We continue
to believe Sun is the best positioned server company
and that it should continue to gain share. The question
is the rate of share gains and continued economic
deterioration may mean additional downward
revisions.

 While we do believe that USIII availability hampered
an already challenging quarter and delayed many
shipments, those issues may be solved. This is key for
two reasons.

1. USIII based delays and quality problems would
undermine the credibility of Solaris, Sun's key
differentiator in the enterprise. With the slow down of
the “dot.bombs”, Solaris and the application lock-in it
generates will be key to competing with IBM in the
enterprise. A reliable and credible hardware platform
affords Sun the full advantage of Solaris.

2. If this scenario turns out to be correct, the roll out of
USIII based mid-range and high-end servers may not
be delayed toward the end of this calendar year. We
believe that USIII based Netra and mid-range servers
may be announced on February 5, 2001 at Sun's
annual love fest, er, we mean analyst meeting.

(T. Kraemer)

Lynn
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