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Technology Stocks : SUN microsystems: 7/18/96 quarterly report - BIG!
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To: peter muckerman who wrote (134)7/25/1996 7:43:00 AM
From: Joe Rizzo   of 386
 
Margins could actually rise; higher margin business is growing faster than slower business. It's no secret that margins of high end servers are well over 50%, and this is the fastest growing segment of Sun's business. Moreover, over the next 5 years, I think it can be rationally argued that software becomes a bigger component of business at Sun. So, although Sun faces stiff competition, there are some offsetting factors. The Bears have been saying for three years that margins will decline. But a simple analysis of the components of sales (i.e., server business growing much faster than rest of business) clearly leads to a different conclusion.

Finally, Sun focuses on operating margins not gross margins. And as the company becomes larger, there is probably room for a 3% decline in operating expenses.

Joe Rizzo
JMR Trading
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