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Technology Stocks : Intel Corporation (INTC)
INTC 34.32-1.2%Nov 18 3:59 PM EST
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To: Eylon who wrote (86530)8/3/1999 11:38:00 AM
From: John Hull  Read Replies (3) of 186894
 
Eylon, Paul,
Less than a year ago, Sun held a press conference along with TI to announce the fact that the two companies together were celebrating the shipment of the one millionth SPARC processor. That was after eleven years of effort.

Sun's value isn't in its CPUs, its in the way they design and deliver complete server and workstation solutions. They are an outstanding example of the old computer industry - vertically integrated, supplying the CPU, system, OS and many of the apps to their customers. The good news is this tight control of a proprietary solution gives them an ability to deliver a well integrated offering. The bad news is that they don't get to take advantage of the volume of the standards based computer industry, thus their prices tend to be higher. Sun ships ~35K servers per quarter and growing 40+% year over year recently - which is very robust and is a testament to their focus. The Intel based server industry ships about 20 times as many servers per quarter and is growing at about 30% year over year - constantly extending the absolute volume advantage. The Intel-based server industry also gets to spread design and manufacturing cost across the desktop processor volumes as well which is substantially larger than the server volume.

Intel takes Sun VERY seriously as a computer company, but I think Intel understands their real strength is not derived from their CPU capabilities. The question is: can Sun's low volume vertical model compete with the high volume horizontal model in the long term?

regards,
jh
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