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Technology Stocks : All About Sun Microsystems
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To: Dennis who wrote (39926)12/31/2000 4:35:48 PM
From: E_K_S  Read Replies (1) of 64865
 
Hi Dennis - What about some IBM too? I also want to spread some capital around this sector and really do not want to buy anymore SUNW right now. IBM's price has retraced a bit and they always rank as one of the top five companies in market share for several of these emerging technologies.

IBM is also very diversified and if they stumble in one area it really will not affect their overall company performance. Finally, IBM has great R&D. They were one of the first companies to develop high density, compact (small), hard drives that leap frogged the current industry standard.

However, I would not pay more than 20 PE for IBM as I do not think their future growth rate will be that of SUNW in the next five years. At the current price of $85, IBM trades at 16.8 times next years earnings of $5.05/share. You also get a dividend of $0.52/share. Based on their five year price history, an ugly bear NAZ market might allow you to pick up shares in the mid $50's.

As for SUNW's current valuation, IMO I still think it is too high based on the current Tech valuation environment. A PE between 20-30 would be a BUY which is equivalent to a stock priced in the range of $18-$26 based on next year's earnings estimate of $0.88/share. Since I already own a lot of SUNW with an average cost basis of around $5.00/share, I might look at adding to my position if SUNW ever trades back to the high teens.

EKS
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