Bill, if I was the "one true genius" you refer to...would I have bought SunW again @ 32?
>Sun (Sell)
Recent Stock Price: $10
52-Week High: $59
Widely acknowledged as one of the best-managed companies in the tech industry, Sun Microsystems drew even more praise for scrambling to get Wall Street up and trading again following the Sept. 11 attacks. Shortly after all 346 employees from Sun's World Trade Center office escaped, they began helping customers, some even driving trucks filled with replacement computers to clients setting up emergency office sites. Some analysts believe Sun's stock is now a good buy, given that servers incorporating Sun's new UltraSparc III microprocessor are being rolled out and could soon boost results.
But the company that once boasted it was "the dot in dot-com" is still reeling from the collapse of the tech and telecom sectors. While it has been shifting its focus to more stable blue-chip companies, its timing has been terrible, since these customers are slashing their spending for tech goods. And the growth of a "gray" market for used servers from failed Internet and telecom companies may be stealing sales from Sun and other original-equipment manufacturers.
What's most troubling is that its mainstay server business is under assault from a host of tough competitors. IBM unveiled a new high-end server this month that it claims costs half as much as Sun's equivalent machine but runs twice as fast. Then there are Microsoft, Intel, HP, and Dell--the Wintel juggernaut--which are rolling out their own systems and undercutting the market. Dresdner RCM Technology fund manager Walt Price echoes the sentiment of many veteran tech observers when he says, "Sun could get marginalized."
The stock currently trades for 38 times expected earnings--hardly inexpensive, particularly when you consider that the multiple hit the low teens during the 1990-91 recession. Near term, most believe that the company's dependence on the struggling telecom and financial industries leaves any turnaround far off. "And longer term, you question Sun's profitability," says Northern Technology fund co-manager George Gilbert, noting that Intel's second-generation Itanium chip is slated to be rolled out next year. Sun does have a history of defying skeptics, and it may well do so again. "Sun is a great company," says Roger McNamee, a partner at Integral Capital Partners in Menlo Park, Calif. "I just don't know whether it's a stock you want to own." |
