Merrill Note on SUNW - 9/26/01
RC-TOPIC:Sun Microsystems (Sunw, $8.67,
C-2-2-9)
o Yesterday we attended the launch of Sun's new high-end Starcat server and
hosted a conference call with Masood Jabar, Executive VP of Global Sales
Operations.
o We came away from both events encouraged about Sun's position in the
server market, but remain concerned about near term demand issues and
customer's preparedness to embrace new products right now.
o Sun CEO Scott McNealy remarked that the WTC outrage would impact Sun and
other vendors. We also heard him come closer to talk about lay offs and a
charge to bring the company's cost structure in line with lessened demand than
at any point in our years of covering the company. While difficult for many,
such a move could be good for the shares.
o After a delay of nearly one year driven by UltraSparc III processor
availability problems, we think the Starcat will be an important product for
Sun.
o Near term, Starcat will close the price performance gap versus IBM in the
high-end that has plagued Sun for almost one year. When IBM's new Regatta line
ships, we expect it to surpass Starcat in absolute performance and trail it in
some high end partitioning and RAS features.
o Sun's reorientation of it's sales force to more Fortune 500 accounts
continues to progress nicely according to Masood Jabar. During the tech boom,
Sun was not even calling on 121 of the Fortune 500. The financial, telecom,
and technical design segments accounted for over 60% of Sun revenues. Big
opportunity verticals like healthcare, manufacturing, government, and retail
were trivial, but he believes that Sun continues to make good progress in those
areas.
o Mr. Jabar also believes that Sun's progress in the wireless area is
underappreciated-80% of soft switching is done on Sun platforms and the top 5
handset manufacturers have adopted Java. While IBM will become more of a
competitor in this vertical, we think that Sun's lead here is important.
(T. Kraemer) |
