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Technology Stocks : All About Sun Microsystems
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To: Haim R. Branisteanu who wrote (9174)4/17/1998 9:56:00 PM
From: uu  Read Replies (3) of 64865
 
Haim & Cheryl:

> Somtimes INGNORANCE is bliss as YHOO share holders can prove..

Funny you should mention this! The other day on a different SI thread I read about valuations of Yahoo. At first I thought the person making the comment was joking but then I looked further and surely enough what I had read was true!

Yahoo with only 30 million dollars has a market cap of 6 billion dollars, while GM with an annual revenue of 168 billion dollars has a market cap of 48 billion dollars! Then I said ok these are 2 different companies in 2 different sectors of the economy. So I checked on IBM which although not in the same sector as Yahoo but still it is closer to it than GM. The mighty IBM has an annual revenue of about 100 billion dollars and a market cap of about 103 billion dollars.

Then I asked myself on what basis do people put such high valuations on a company such as Yahoo, such a low valuation on a company such as GM and such an unreasonable valuations on IBM?! If you think about this even with the wildest and the most optimistic scenerios I do not think for a second that Yahoo can possibly ever come to have an annual revenue of 6 billion dollars or for that matter 1 billion dollars to justify for its hefty market cap of 6 billion dollars at this time! Sure Yahoo is growing, but to put a 6 billion dollar vaaluation on a lousy 30 million dollars is simply idiotic!

So the moral of the story is that you can go by the underlying valuations and fundamentals and say this and say that and bring all sorts of logic to justify and to expect (and in fact to demand) for much higher valuations for a company such as Sun Microsystems. But the fact is when it comes to investing the perception always leads the fundamentals! If a company can convince the investors to base their perception on its underlying fundamentals then power t that company and that would be great. In case of Sun Microsystems, the company has failed to convince the investment community to base its investment perception on the company's fundamentals.

Eventually this will change since as the old saying goes Truth shall always prevail, however till then we will have a great company that is simply put (and as funny as it may sound) "misunderstood"!

Regards,

Addi Jamshidi
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