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Technology Stocks : All About Sun Microsystems
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To: QwikSand who wrote (26801)1/26/2000 12:01:00 PM
From: johnd  Read Replies (5) of 64865
 
There is a lesson to be learnt from what is happening to QCOM today.
First kudos to SUN management on generating 25%+ growth rates in top
and bottom line. That too in an environment where:
- Linux and NT are competing aggressively on low end
- Sun's US2 is a dog among high end CPUs
- Had to take share away from IBM and HP on high end
Terrific management - marketing and sales. Java, Jini, dot com hype
has worked.

But I must tell you what I see going forward
- There is serious risk of new margin pressures
* IBM is very aggressive all of a sudden starting this
month to "Kick butt" on SUN
* US3 driven R&D (implying heavy NRE spending, production
order with scrap risk)
* Windows 2000 and Solaris OS & up to 8-way price pressures
on low end

Lot of folks on this thread are momentum investors. But need to remember
that momentum goes both ways -> Up and down.

For people who care about fundamentals:
SUNW is worth about 38 per share or less than half of where it is now
(just my opinion. You may disagree and that is fine).
Why?: SUN has about 25% growth rate. Mcneally in conf. call was trying
to bring expectations even lower to 20% (bit unusually so).
What price to growth would I give SUNW? I would like to give PE/growth
of 1 but I will stretch it and give a PE/growth of 2. At PEG of 1 it
deserves 25 * .77 or 19.25. But I will stretch it give a PEG of 2 or
about 38 per share.
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