Charlie, don't compare Dell and Sun. Look at the Dell's earning growth. It's more than SUNW, that's why DELL deserves a higher PE than SUNW. However, being both a SUNW and DELL stock holders, I can easily see SUNW having a higher return than DELL over the next year, because SUNW has been beaten down quite badly over the last quarter. If SUNW as promised, announced a major JAVA deal this week, I can see it shooting up to 50 by the end of the week. Otherwise, we might see some profit taking later the week and drag the price down to around 45. I think we will trade between 45 - 55 before the next quarter report comes out in April. How we will do after that will entirely depend on how well SUNW execute next quarter. If they execute as falsilessly as they did this quarter, then look out, we may see 60-65 in June. If not, it could dip down to the 30's.
My feeling is the new Darwin line will sell like hot cakes, but because of the price of those machines are low, you may see profit margin goes down. As for Java, I don't think we will see any real money coming in in couple years. I live in Seattle, heart of the MSFT country. There were some details about the TCI/SUNW deal last week posted in Seattle Times. Any analyst predicted that TCI will pay $4 to SUNW to use Personal Java in their set top boxes. However, they will pay $25 per box to MSFT for using windows CE. That tells me that Java revenue would be very insignificant (assume TCI sells 12.5M box, at $4/per box, it's only 50M, small changes to the 8.5B revenue that SUNW generated each year. Even if 90% of the 60M house hold in USA use these boxes by 2005, SUNW would only get about 30-40M per year from this, no big deal.) I understand that $4/box estimate may be low, but I don't think the analyst is off by too much. But deal with it, java isn't going to mean much to the bottom line in the near future, at least for the next 3-4 years. I think people should be realistic about the target price, don't base it on Java, base it on enterprise servers... |
