Milunovich of Merrill has been relentlessly negative on everyone of his reports on Sunw since he started covering Sunw about two months ago (he must have issued at least a dozen reports). His report today (with Larry Tankel) is another hack job on Sunw. He speculates that Sunw will have to cut workers this summer and this is going to hurt next year's earnings. This speculation is sure to be a morale booster at Sun.
Ever since Merrill went positive on Intel at $26, they have never missed a chance to trash Sun, going so far as to call it the next Silicon Graphics which they retracted later.
Sunw's market cap is less than $30 billion now while that of INTC is 7 times higher, MSFT is 11.3 times higher, IBM is 6 times more. MER knows that it will get lot more business from Sun's competitors than from Sunw. So it makes good economic sense for Merrill to trash Sunw to curry favor with MSFT, INTC and IBM, IMHO. Now, Sun represents a few percent (4%) of the economic opportunity of INTC, MSFT and IBM. Just today, IBM, MSFT and INTC have added market cap nearly equal to 40% of Sun's total market cap.
BTW, when IBM fell below under $102 on the news of its creative accounting, Milunivich was quickly defending the stock asking MER customers to buy. He knows which side his bread is buttered on.
I remember MER upgrading the stock at $120 (presplit or $60 postsplit). Now it's a hold at under $9. When you commit the original sin of letting your market cap fall, your "analyst friends" on Wall Street are the first to desert you.
In short, I do not ever expect anything positive for Sun from Merrill (esp. Milunovich). Time will tell whether he's right. But in the meantime, the considerable research clout of Merrill is working in his favour. |
