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Technology Stocks : All About Sun Microsystems

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To: cheryl williamson who wrote (39519)	12/20/2000 5:02:40 AM
From: uu	Read Replies (1) of 64865

I think what Ken is implying is being misunderstood by the bulls who are still in the denial state that we are in a bear market and that stocks will continue to fall in the immediate short term (next 2-6 weeks). Mr. Greenspan's job is not to support the stock market but making sure the economic environment is healthy for profits to grow. After all said and done by the end of January 2001 when (and not IF) he and his fellow fed governors drop the interest rates by 0.25%-0.5% points we will start seeing a rally in the stock market. For every 0.25% drop it will take 9-10 months for its impacts to become visible through the economy. Since stocks represent 6-8 months advance notice of how corporate profitability will be, I therefore expect the real rally starts happening in early March 2001. And when that happens the upside movement is going to be very rapid and huge. As for SUNW as I expressed about 3 weeks ago when it was in the low $30's it still has further downside to go. SUNW at this time no longer deserves to have a P/E of over 60, and a market cap of about $100 billion. I believe those days are well behind us for the following reasons: a) The server centric computing model is now matured as the majority (if not all) business entities have transformed themselves into the server centric model (i.e. the capital spending for this evolution to take place is fully completed). It is no longer 1995-1996 during which corporations would set aside a good chunk of their capital spending budgets in building their server centric infrastructures. The foundation of that build up is completed and therefore Sun does not see the initial growth rates in its revenue and earnings going forward. (Note: The growth will continue to be there, however that rate at which this growth will take place is drastically diminished due to the finalization of the initial capital spendings). b) The .com hype has ended. I strongly disagree with those (including Sun that call sitself the dot in the .COM) who try to downplay the .com notion and state that only 10% (or lower) of Sun's revenue is based on such companies. The fact is Sun's major factor and reason for its revenue growth rate has been the rate at which .com companies came to exist. With billions of venture dollars at dispose by .COMs Sun took in a good chunk of that money as these ..COMs (directly or indirectly) came to heavily depend on Sun's servers and other server related hardware. It is true that Sun's direct revenue from .COM's maybe in the 10% range, however the .COMs existence manifested into many side effects (all of which are gone as they disappear). Therefore as the growth rate in the number of .COMs decreases so would the growth rate at which Sun can grow its revenue and earnings. Personally and as much as I hate to state this I believe at this time (based on its nearest competitors -- HP and IBM) Sun deserves only a P/E of about 25-30 and a maket cap of about $50-$60 billion (or about 20%-25% lower than its current market cap which translates into a stock price of about $20-$25/shr). Add to this a negative overall market sentiment as we continue to be in a bear market for the next 4-6 weeks and we may even see the stock to drop below $20/shr for a short period as well. I personally continue to hold a small number of shares that I recently bought back at $108/shr (or $54/shr post split). I did buy some at $27/shr to average down and will be buying more in the low $20's (of course if that happens). I believe the next wave of revenue and earnings growth for Sun will come when the wireless/WAP computing evolution starts to really take off. And that will probably not happen till end of 2001 early 2002. In a couple of years from now anyone who buys now would kick himself for not buying more! Please note above all my humble opinion and I have proven to be wrong many times in the past. Regards, Addi Jamshidi

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