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Technology Stocks : All About Sun Microsystems

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To: uu who wrote (4810)	10/17/1997 10:49:00 AM
From: Holger Johannsen	of 64865

After lurking for several months I just have to post today. Please excuse my English since I'm not a native speaker. It seems like madness reigns on Wall Street. Taking another look at the results I don't see anything that would make me sell the stock at 36. The earnings growth in operating earnings was 32%, EPS growth was 28% and the stock gets punished by more than 20%. Is that madness? Just because some analysts who tried to hype the stock put the bar up quite high, the stock has to suffer now. Milunovich was right on target and I wonder if he downgrades the stock as well even if he knew the numbers before. A neutral spectator could think that Sun plays in the same league as SGI or APPL but these are hopeless financial black holes. Sun is quite a terrific company instead and continues to do well in an environment that is focused on Wintel. I'm long on Sun for several years and I always enjoyed the ride. Most of the time the wise men on Wall Street ignored Sun or interpreted it the wrong way. Today is again one of those moments and it is one of those rare buying opportunities. It's a good time to average up since I also felt that the stock was getting a bit ahead of itself when it hit the 50s. All the wise men will downgrade the company, all the weak hands will be shaken out and fear will reign. The right scenario for a fool to buy a fundamentally sound company at a bargain price. The balance sheet looks good to me, earnings were good, revenues a bit soft but it's their historically weakest quarter. The currency problem will probably remain a problem through next quarter but eventually will fade away. It does not really concern me. I always bought Sun for the server and storage business and I feel it will continue to grow since both are out of reach for Wintel. IBM seems to be the only remaining competitor in the business since HWP sold itself to M$. Looking for reasons not to buy the stock one could think of NT but I seriously doubt that M$ will be able to produce a piece of software that is not flawed. It is in their interest not to produce such a piece of software since people would then not upgrade as soon. I'm no expert on UNIX or Windows (I do use OS/2 which is lightyears ahead of Windows) but our regional computing center at the University runs SGI and Sun machines only. I talked with them and asked them about NT and the chances of using it. They tried it once but apart from all the software problems, they told me about a very poor customer service. It seems this is one of the big Achilles heels M$ faces. Merced could be another problem for Sun but as always people compare today's Sun machines with tomorrow's Wintel boxes. I remember people telling me years ago that someday a PC could give me the power of an SGI machine. I have not seen such a PC yet. But in any case, I hedge myself by owning some Intel which I feel will be the dominant player in the coming years. And the stock has the same negative sentiment right now as Sun does, which makes it an attractive investment. BTW, I enjoy Addi and twister in their arguments and both have valid points. Nevertheless I don't understand why this gets kind of religious. I feel all three (INTC, SUNW, MSFT) will flourish in the coming years despite the fact that they fight against each other. There is enough space for all of them and if MSFT (the stock) was not that much overvalued I would certainly buy some because their financial success is inevitable (not their growth rate though). Sorry for my lengthy post and back to lurking. Holger

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