Sankar:
> Can you relate JAVA's popularity to SUNW's future (earnings
> potential) to command a P/E of say 50?
Recall how IBM was prior to the introduction of PCs? The computing model was based on a mainframe architecture. Then PCs came and of course Microsoft. The computing changed from Mainframe to private, fat client machines (namely PCs and Windows OS). And then came client-server computing model. This resulted in a boost for companies such as HP, Sun, and IBM. The client-server is now evolving into a different level. With Java the paradigm in computing is shifting toward client-server-server-server-... In as sense it is sort of going back to the Mainframe model however with a lot more sophistication, low cost and scalability. This new model is what is known as thin client/server centric architecture. Similar to Mainframe model where dummy terminals were the interface via which end users interacted, in a thin client model you have thin machines (e.g. NCs, digital/Web TVs, etc.) as the user ineterface for computing. The computing part will be taking place on one or more cluster of servers. In a way the fat client software is now pushed to the other side freeing up the client machines and bringing down their cost. This opens up a wider audience and population to the computing and information technology due to ease of use, low cost and simplicity.
In this model it will be powerful servers and thin machiens such as NCs that will boost the sales of companies such as Sun. Software will become more like a video movie, NC type thin machines sort of like VCRs, and companies such as AOL sort of like the Video Rental storse. And by this analogy if you compare now to lets say 10 years ago the number of video rental stores has increased by 300% and in fact just go outside of your home and to your nearest mall and count the number of video rental stores around.
Sun is in a lead position to not only provide the servers, but also the actual thin machines (NCs), in addition to providing the chips with embedded Java VM (or licensing out the Java VM to ASIC chip makers, etc.) to prosper from the client side also. Not to mention that it owns the Java technology and can eventually get into actually providing some of the powerful software (aka Videos in the analogy given)! Although for now Sun does not want to get into that business.
And surely the competition will always be there from IBM, HP, and even DEC and others. But then you also have Coke, Pepsi, 7UP, Dr. Pepper and whole bunch of others too. But Coke (to me at leaast) will always be it! And Sun, in my opinion, is the Coca Cola of the server market.
As for the trailing P/E of 50 for SUNW. I may not go that far at this time however considering the potentials that the new computing model will generate in all sectors of the economy a P/E of 50 for SUNW is not impossible or for that matter improbabale! Keep in mind computing is no longer just the desktop market, and anything that runs on electricity and has a chip inside is now part of the computing model defined by Java (Sun's Java)!
Regards,
Addi Jamshidi |
