Thomas, I agree fully with you on that topic. I don't think it will
happen though. Sun was also rumored to takeover Apple but this never
materialized either.
Anyway, here are some news from Lehman about Sun:
Headline: Sun Microsystems: Upbeat Analysts Meeting
Author: George D. Elling, CFA 1(212)526-3823
Rating: 1
Company: SUNW
Country: COM CUS
Industry: COMPUT
Ticker : SUNW Rank(Prev): 1-Buy Rank(Curr): 1-Buy
Price : $48 1/2 52wk Range: $53-26 Price Target: $55
Today's Date : 02/03/98
Fiscal Year : JUN
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EPS 1997 1998 1999 2000
QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr.
1st: 0.32A 0.41A 0.41A - -E - -E - -E - -E
2nd: 0.46A 0.57A 0.57A - -E - -E - -E - -E
3rd: 0.51A 0.60E 0.60E - -E - -E - -E - -E
4th: 0.61A 0.72E 0.72E - -E - -E - -E - -E
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Year:$ 1.90A $ 2.30E $ 2.30E $ 2.75E $ 2.75E $ - -E $ - -E
Street Est.: $ 2.32E $ 2.33E $ 2.74E $ 2.78E $ - -E $ - -E
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Price (As of 2/2): $48 1/2 Revenue (1998): 10.0 Bil.
Return On Equity (98): 29.9 % Proj. 5yr EPS Grth: 18.0 %
Shares Outstanding: 393.0 Mil. Dividend Yield: N/A
Mkt Capitalization: 18.84 Bil. P/E 1998; 1999 : 21.0 X; 17.6 X
Current Book Value: $7.70 /sh Convertible: None
Debt-to-Capital: 4.4 % Disclosure(s): C
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* Sun hosted its worldwide analyst conference on January 29/30th. In our
opinion, all aspects of the meeting were upbeat as management attempted to
articulate its vision for the future. Current business remains. Mgmt wants
more results consistency long term.
* A new family of intelligent storage products were recently introduced, and
we expect an announcement of new NC's soon. Sun is also working on its next
generation UltraSPARC, the UltraSPARC III with 600 MHz capability and future 1
GHz speeds, in our opinion.
* Sun believes it can sustain 15% plus growth in the future and will continue
to seek out minor acquisitions as it has done in the past. Management stated
that if the right opportunity came along it would also consider a large
acquisition.
* Management indicated three issues that they must watch closely; these
include hiring trends (Sun has been adding 1,000 people a quarter), brand
recognition and developers attention.
* Sun continues to gain momentum within the Internet space especially as Java
increasingly becomes a major force in the industry.
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Investment conclusion. Sun has proven its ability to compete head to head
with enterprise leaders such as IBM and Hewlett-Packard. In addition, while
we expect the battle to toughen versus Windows NT, Sun's unique focus in Unix
and its clear vision for the future should allow it to maintain a strong
industry position. Although the shares have moved up sharply in recent weeks,
we continue to believe they represent an attractive value and maintain our 1-
Buy rating.
Highlights From The Analysts Meeting.
Sun believes there are ten key reasons why the company is well positioned to
continue its favorable growth in the future. These include:
1. World class operations, logistics and a low cost model.
2. For every action there is a reaction.
3. The company offers a superior alternative to wintel.
4. Portfolio business model, with hardware, software, and service components.
5. Solaris scalability from 1-64 processors and growing.
6. No reboot reliability.
7. Run your business enterprise applications on Sun.
8. Java
9. Killer sales force, with strong enterprise account penetration.
10. Company focus on Unix and Enterprise computing.
In addition to the future introduction of the UltraSPARC III, Sun believes it
is well positioned in the server arena and is well on its way to 128-way
processing, far above where NT is headed in the near and intermediate future.
Sun is also strong in clustering and has a broad range of server capability.
With regards to Java, management's goal is to perfect and stabilize the system
over the near term. Sun now licenses several versions of Java including Java
for the enterprise, JDK, embedded Java, personal Java and the Java card. New
products include Jump-start, Hotspot and Companion.
The UltraSPARC II, with 300 megahertz, remains the company's flagship chip at
the current time although the microSPARC III featuring 600 megahertz
capability will sample this year and ship in 1999. It is estimated that new
systems incorporating this chip will provide 35 plus spec_INT 95 and 60 plus
spec_FP benchmark ratings. In addition to the UltraSPARC II's, the company's
UltraSPARC IIi, is featured in the recently introduced low-end workstation
Darwin and appears to offer excellent price performance, selling below
$3,000. The company is also beginning to sample its Java chips and we expect
microJava 701 to be implemented in the near future. 1998 will be the year
that the Java chips will be a reality.
From a financial standpoint the company pointed to consistency in the
marketplace now, with market opportunities greater than a year ago. Excluding
currency, Sun would have grown above 20% for the first half of fiscal 1998.
Longer term, management expects international revenues to exceed those of the
US. Currently 11% of revenues come from Japan, 26% form Europe and 12% the
rest of the world. Sun sells in yen in Japan although it hedges currencies
each quarter. Accordingly, net income was not affected in the prior quarter
although actual revenues were impacted to a certain extent. With regards to
the rest of the world, Sun bills in dollars. Accordingly, demand, to a
certain extent, has been affected by currency swings. Gross margins, which
were reported at 51%, have been excellent, although management does expect
them to decline over time. Nonetheless, while we expect gross margins to
fall, we believe the company's tight cost controls should enable SG&A to
decline as a percentage of revenues.
The current run rate for Starfire (Sun's high end servers) is approximately
500 per year.
Management believes that Smart cards could provide a significant Java license
revenue source in the future.
We maintain our full year earnings projection of $2.30 per share for fiscal
1998 and our projection of $2.75 for fiscal 1999.
BUSINESS DESCRIPTION: Sun Microsystems, with fiscal 1997 revenue of $8.6
billion is a leading provider of client/server- based network solutions.
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Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the
past three years a public offering of securities for this company. B-An
employee of Lehman Brothers Inc. is a director of this company. C-Lehman
Brothers Inc. makes a market in the securities of this company. G-The Lehman
Brothers analyst who covers this company also has position in its securities. |
