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Technology Stocks : All About Sun Microsystems
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To: uu who wrote (5299)11/1/1997 4:16:00 PM
From: Rational  Read Replies (2) of 64865
 
Addi:

Thanks for the response. Here are the trailing P/E's:

IBM: 17.23
SUNW: 17.21
HWP: 21.52

KO: 33.94
PEP: 31.36

MSFT: 48.36

Thus, SUNW is having the same trailing P/E as IBM. KO is having a slightly higher P/E than PEP. If you consider SUNW as the Coca Cola of the computer industry, then its price will be simply a little bit higher than $34 if you want to accord SUNW a P/E of 33.94*17.21/31.36.

The precipitous drop in the share price of SUNW appears to be linked to JAVA not producing much earnings for SUNW (this was not known to the WS until the contract was made public). The drop brought SUNW to the level of IBM's P/E.

I see a big possibility of MSFT P/E dropping to these levels soon after the street realizes that Java will make the Windows redundant. At this time, there is no clear picture yet and most of the funds who own MSFT do not seem to want to download as a result of the standard herd mentality of the street, IMHO. Incidentally, building up the cash (as opposed to paying out dividends or repurchasing stock) is a shrewd strategy of diversification by MSFT!

I still consider SUNW's current price as fair, and not a result of "idiotic" selling. Of course, when the expected EPS changes, SUNW's price will adjust accordingly.

Sankar
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