To all: The latest skyburst of un-brilliance from my un-favorite technical and financial columnist, the Reliably Fatuous Jim Seymour. It's from RealMoney.com which requires a subscription, so I reproduce it.
It's the 'Computers' excerpt from today's update of his list of 25 stocks for the year 2000 originally published in January. In that update, SUNW is shown up 17% since the beginning of the year, which puts it in the top half of his list, and DELL is shown as down 3%, in the bottom half. Still, RFJS manages to come up with a nice, optimistic outlook on DELL because of their "huge gains in the server business" ("I said I thought it would be 70 by the end of the year, and I still do."), while he comes up with a mealy-mouthed, wishy-washy downgrade of SUNW.
Notice that he says SUNW has done "not as well as he expected" based on their stock price. RFJS then goes on to explain the stock's performance in terms of things that would affect revenue, even though Sun's industry-leading revenue growth has been reported as a record both times this year?
I find this frustrating. This next earnings report is an opportunity for SUNW to shove Mr. Seymour's words down his well-larded gullet, of which I hope they fully avail themselves.
--QS
...Computers
Just two companies here this year -- the hardware business just isn't as promising as it once was. I suggested Dell (DELL:Nasdaq), because I think it has the best chance of popping up big this year, thanks to its exploding Windows and Linux server business, and Sun Microsystems(SUNW:Nasdaq), for exactly the same reason on the Unix side of the aisle.
By midyear, Dell was down a little, after struggling back up from a low of 37 in late January. A flatter-than-expected quarter, attributed by Dell in part to component shortages (mainly Intel chips), plus the general malaise in the box-making business, has hurt Dell this year.
Its desktop and notebook businesses are doing well, and Dell remains the preferred supplier for a long list of top corporations. Indeed, it has benefited there from defections from Compaq (CPQ:NYSE). On the consumer side, Dell's doing OK, but Gateway (GTW:NYSE) is roaring in consumer direct sales and Hewlett-Packard (HWP:NYSE) is becoming the big dog in consumer sales at retail, where Dell doesn't play.
Dell's consumer side also got a high-profile black eye this week, as it discontinued sales of its highly touted WebPC, a great-looking sort of all-in-one home PC that just didn't draw much consumer interest. (I regretted that, because it's a great machine -- and at the closeout prices now found on Dell's online factory-outlet site, it's a steal. Still, the market, having writ, moves on...)
A month or so after that ''25 for 2000'' column appeared, I wrote here that thanks to the huge gains in Dell's very profitable server business, I expected to see them in the 70s by year-end. I still do.
Sun's done well, though not as well as I expected, since the first of the year. One of the inescapable side effects of the market crunch on dot-coms is a parallel sag for their biggest suppliers: the dot-coms simply can't spend money the way they used to, and they especially can't simply throw money at technical problems any more.
That approach usually translated into adding more servers, quickly, as a brute-force answer to performance problems. Now we see other paths, such as edge-of-the-Net caching a la Akamai (AKAM:Nasdaq) and Inktomi (INKT:Nasdaq), as more sophisticated answers than buying another $300,000 all-the-bells-and-whistles Sun server ... or two, or five.
Another issue that's becoming a problem for Sun: the migration by dot-coms, and some corporate users as well, away from high-priced brand-name Unix servers, such as Sun's, to much less expensive Windows or Linux-based servers. Test after test has shown that a larger number of these generic servers -- which may, of course, have names like Dell or Hewlett-Packard on them -- provide more performance for less money, and the additional benefit of redundancy, than a few Sun boxes.
I suspect that no hardware company has more dot-com customers than Sun, whose industrial-strength Solaris-powered servers fill dot-com's server farms, and lie at the heart of the Net itself. So over time, these changes have to hurt.
I'm not worried; I expect to see Sun keep climbing.
But it is fair to ask if the company will ever again be the shooting star it once was. I don't think so; that phase of the hardware business is over. I do, however, think Sun is one of the few relatively safe buys this year in computer technology. If the return is less than stratospheric for the year, at least we can be pretty sure there will be a return. |
