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Technology Stocks : All About Sun Microsystems

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To: R. K. (Chip) Constantian Jr. who wrote (4962)	10/20/1997 2:41:00 AM
From: E_K_S	of 64865

Hi Chip - Thank's for the Lehman Report link (http://www.lehman.com/Research/dept/sect129.shtml)... According to Lehman Bros. they come up with the consesus street estimate for earnings of $2.34 (1998) and $ 2.87 (1999). They also state that they view "the normalized growth rate" for Sunw to be 17%. Therefore, IMO a conservative valuation for SUNW based on Lehman Bros. 1999 estimates and a 17% growth rate would be $48 3/4. This is where the growth rate=PE. Many times as the momentum and rate of growth increases, the market will pay a preminum for these earnings which could go as high as 30x's (just check out MSFT). I would think 17 (forward) PE is low but conservative. It is possible that SUNW's PE could exceed 25 if several back to back positive growth quarters are posted and management is able to implement their business plan ahead of schedule. Remember the market (S&P 500) PE is now running at all time highs of 21 times. At Friday's closing price SUNW's PE based on 1999 earnings is 13.42! That is a real bargin to this value investor. Regards EKS

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