Price/sales valuation worries some professionals, who
consider it a convenient means to ignore the fact that
many stocks have a ridiculously high P/E ratio (at least
compared with prior market history). [There was an article
in the WSJ about this recently.]
I would expect ML (assuming you mean Merrill-Lynch) to
take the more conservative, traditional route of using
PE.
SUNW is a really unique company. In the past they basically
competed with the other Unix workstation manufacturers
(HP, Silicon Graphics, IBM, etc.)--and that's what they
were, a manufacturer of UNIX hardware.
But then maybe 4-5 years ago the entire UNIX world was
beginning to feel threatened by the increased power
and substantially reduced pricing of PCs. Intel's
new CPUs could now match the performance of lower-end
UNIX machines, at a lower (and falling) price. The
threat at the hardware level was matched by Microsoft's
threat at the operating system and software level. Does
anyone know of any good UNIX word processors?
Anyway--Sun changed. Since that time they have moved to
the forefront and, along with Oracle, have challenged
Microsoft's domination. To me, looking at all of this
in retrospect, it was a brilliant move to embrace the
web, invent Java (which Microsoft vowed to "embrace,
alter, then discard"), and they're continuing today.
So, it's difficult for me to compare SUNW to any other
company -- which makes it hard to compare statistics
like Price/Sales and PE. Maybe IBM is the closest now,
in it's innovation with XML and other very new
technologies. But IBM is a behemoth that's trying to
learn to leap, while Sun has already proven itself to
be quite the ballerina. HP is dividing itself into
parts -- I like their products (I've worked with lots
of them and bought lots), but somehow they've never
gotten it all to work together seamlessly (scientific
instruments, PCs, UNIX machines, laser printers, etc.).
And HP is not a big player in the innovation that's
happening right now (XML, Java, etc.).
As for the others: MSFT is only software, INTC is only
hardware. In a way, though, MSFT is where the battle of
influence is occuring. But Sun doesn't make it's money
by winning the battle of influence with MSFT. It makes
money from selling UNIX machines. So, enter enemies HP
and IBM.
So -- I've ended up telling you nothing of what you asked!
SUNW is a unique company that is trying to influence the
future, in major part to ensure its own survival. Who
would have thought DEC (always the #2 hardware firm,
after IBM) would meet the demise it met? SUNW is much
smaller than DEC and its influence and its hold on the
marketplace much smaller than DEC's was at one time.
My feeling is that Microsoft is stumbling, and SUN has
invested so much in influencing where we are today and
where the Internet and software development are going,
that it is likely to be the primary beneficiary of the
move from the desktop to the net (see a really great
report in the Interactive WSJ from November 15).
So--no help on Price/Sales analysis (sorry). But for
now (through January at least due to January Effect)
and probably much of next year I think SUNW and all
computer manufacturers will do well (too many companies
and US Govt have postponed hardware upgrades due to
Y2K fears). And I think SUNW is the leanest, nimblest,
and craftiest (while being "nice") of the companies
you mention, which (if I'm right) bodes very well for
the longer term.
Thanks for requesting my response! |
