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Technology Stocks : All About Sun Microsystems

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To: Sonki who wrote (6433)	12/28/1997 3:12:00 PM
From: uu	Read Replies (1) of 64865

Hi Sonki: > could you see it lower in a bear market? An interesting point you brought up! Everywhere I turn these days everyone is talking about the big bear market of 1998, and all give the South East Asian situation as the main reason. I strongly tend to disagree with this notion of a bear market in 1998. Besides the very fact that according to market's logic because everyone thinks the same thing it will therefore behave just the opposite (!), Here is my feels for the market of 1998: 1. Interest rates will be cut (at least) twice next year. One cut will come in Q1 of 98 and the second one sometime in Summer/Fall. 2. The South East Asian situation will stay around for a long time, however its impacts on US corporations willl be at minimal (which will last for perhaps during Q1 of 98) and in fact after the Q1 it will have a positive impact on US corporations earnings! This positive impact will come in the form of assimilation of Korean and South East Asian high tech firms by US high techs at the low bargain prices (thanks to all the currency devaluations and other economic problems these countries are facing. The openness of South East Asian governments for foreign corporations to take over their firms will be very high!). This will result in 2 very poisitive points for US firms: First they will be eliminating their competittors overseas which for years gave them a hard time by undercutting their prices (thanks to all the government subsidies those companies were getting), and secondly because of US firms take over of South East Asian firms they will expand their production and manufacturing costs in that region of the world which becomes practically free for them (again thanks to all the currency devaluations). This will help them to maintain and in fact increase their profit margins without any significant increase in prices (i.e. no inflation)! As a side effect of US high techs take over of SEA firms and shift of their production cost to that region the local economy of that region will improve and in fact US firms become the heros of South East Asians!! Therefore things eventually take care of themselves and SEA will be a an event of past! 3. The entrepreneurial spirit in the business community at this time is at its highest ever in the US, and with a low inflation and low interest rate that spirit will only be empowered. Under this circumstance a bear market can not even come tto exist (not to mention survive)! As for SUNW, I think your calculation is logical, However I continue to think in 98 SUNW will reach a P/E of 30-35 (and perhaps not 40 yet). As for MSFT, I bought some more at $119 last Friday again. It may come down to the $100 level, but my suggestion is to take advantage of the foolishness market is having for throwing their MSFT shares out because of all the law suits and/or browser wars and/or the idiotic psychology/sentiments of SEA problems! MSFT is to deliver its record revenue and earnings in the later part of 98 as Sun's thin client computing model will reach its semi maturity level both at consumer as well as corporate level. Regards, and A Very Happy New Year! Addi Jamshidi

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