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Technology Stocks : All About Sun Microsystems

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To: Holger Johannsen who wrote (6662)	1/11/1998 12:44:00 PM
From: E_K_S	Read Replies (1) of 64865

Hi Holger - I have been doing some research on Sun's "non-US" manufacturing facilities and found the following article regarding their Scotland plant which opend in September 1990. (http://sunsite.unc.edu/pub/archives/sunflash/1990/Sep/21.08.linlithgow) SUN OPENS MANUFACTURING AND SUPPLY FACILITY IN SCOTLAND SunFLASH Vol 21 #8 September 1990 In the article they make reference to a new "Supply Unit" to be opend in the Pacific Rim in the "mid 1990s". "...Besides its three existing facilities, Sun plans to bring another supply unit on line in the Pacific Rim in the mid 1990s..." I also think Sun outsources many of their component boards and utilize a sophisticated "JIT" Just in Time assembly/delivery network to manage customer system orders. Given such an order system, I would assume that Sun could reduce their exposure to foreign currency exchange risk substantially. Generally these "outsourced" assembly contracts are established on a fixed cost per unit (to Sun) with additional incentives for the vendor based on production & quality standards and fixed component cost procurement. I would hope that they negoatiated fixed costs (to Sun) pegged to the regional currency or some ratio based on the $/yen; $/DM; or $/Pound for products sold into those geographic regions. Also as you stated, the company does hedge foreign sales using future currency contracts but I believe it is forward only three months not six months. As long as all orders received are paid by the customer within this three month window, the foreign exchange currency risk is quite small. Leased or customer progress payment schedules I assume would be adjusted (for currency changes) every month or quarter accordingly. The bigger question is the effect of the strong U.S. dollar on foreign sales especially in Asia and the Pacific Rim. We already saw the impact on the Japan sales slow down last year and IMO I believe the same growth rates will be reported for 1997. Dodn't expect double digit growth in Asia until Japan's economy begins to grow. The growth for Sun in Q4 1997 through Q2 1998 will be in the domestic U.S. region (North America) and Europe/Germany. I am looking forward to the quarterly report as is Wall Street. Remember this quarter is usually the strongest for Sun. Good Luck to all. EKS

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