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Technology Stocks : All About Sun Microsystems
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To: Charles Tutt who wrote (47683)3/7/2002 10:46:29 AM
From: E_K_S  Read Replies (1) of 64865
 
Hi Charles:

The concern is that the "analysts" think SUNW's margins will continue to be squeezed since Sunw has not cut fixed expenses enough. They really want to see another round of lay offs but IMO it is a double edge sword. If indeed we have seen the bottom, the analysts agree that SUNW is leveraged to the point that revenues and earnings will expand faster than those companies that were aggressive in their first round of layoffs. My concern is that if we get a double dip recession and GDP growth slows, the recovery will not occur until Q1 2003. I have to leave it with our management as they have proven in the past that they can manage both their expenses and growth as demonstrated in their product cycle transitions over the last five years. They key is to watch the turn in the employment numbers and if another round of industry downsizing must occur. If so, Sunw will have to follow and their recent guidance that the turn would occur in June-July will slip to Q1 2003 (IMO). In the long run, it is no big deal and might make a great "last" buying opportunity. As long as management keeps their balance sheet solid and maintains a positive free flow cash flow, they will weather this period. I just hope they can maintain their R&D investments and do not cut significantly in this area.

EKS
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