Gene,
Maybe you haven't heard of the great patron-saint of American
common-sense, Harry S. Truman, by his quote perfectly applies
to you and your investing strategy in SUNW stock.
So you say SUNW is a hardware company? Not strictly. When SUNW
charges more for its mid-line servers than PC's, why should a
customer pay for SUNW? You pretty much get what you pay for with
hardware. Every company benefits from cheaper hardware prices,
so PC's sell for a fraction of SUNW servers & PC's have cpu's that
are only a little slower. The reason is software & service.
Customers who buy SUNW mid-level & Enterprise servers are buying
reliability, scalability, much higher throughput, and full service
& support. They're also paying for the SUNW brand. The real debate
is over the ability of MSFT to deliver on all their promises to
make NT workable on a level with Unix (more specifically Solaris).
To date the answer has been a resounding "NO".
I'm afraid INTC & CPQ can't be of any assistance here. All they
can do is make cheaper & more powerful hardware. Guess what? The
technology available to them is available to SUNW as well. So,
SUNW has come out with low-end servers & workstations that sell
for prices highly competitive with INTC-based machines AND they
run Solaris and Java. Their site-licensing scheme with Solaris
for workgroup servers and low-end Darwins makes it actually CHEAPER
than Wintel's offering in the same class. So where's this "eroding
the margins of SUNW workstations & servers by INTC" supposed to take
place?
We've been hearing this claptrap for the last year-and-a-half, and
it just isn't happening. In fact, it looks like PC maker's are
having a real problem with their own margins. INTC makes a gross
profit of nearly $600/unit on their high-end Pentiums but only about $50/unit on the cheaper MMX chips. They need to sell higher end
systems, but the bulk of the market has recently been focused on sub-$1000 PC's. INTC "retired" Andy Grove right after their last
set of numbers came up short last month. They want to have a
presence in the Enterprise, just like SUNW, so they are pinning
their hopes on the jointly developed (w/HWP) Merced 64-bit chip.
Well, I hate to disappoint the naysayers (like you), but high
school cheerleader, Scott McNealy, managed to convince INTC to license
64-bit Solaris on the Merced. So if CPQ wants to get into the
Enterprise computing market, they are going to have to sell Merced-
based systems, and those systems are probably going to be running
Solaris whether CPQ has commitments with MSFT or not.
Fact is, SUNW has been working on 64-bit Solaris since 1995 & they're
ready to port it to Merced (ETA Q1 1999). HWP has been working on
64-bit HPUX for about the same time and their dates keep slipping.
Just last year someone explained to Bill Gates what 64-bit operating
systems were & how much money he could make with them & he proclaimed
that NT would definitely become a 64-bit operating system (some day,
I'm sure).
The difference is that SUNW is an engineering company, HWP used to
be an engineering company, and MSFT is a marketer of software toys.
So, if you believe in a company, it's because you understand and
believe in their goals and the power (yes power) of their ideas,
execution, and management. Since high-technology is beyond the
understanding of most investors, they seem to rely on the Wall St.
suits to tell them where to put their money. It's like the blind
leading the blind.
cheers,
cherylw
BTW: RTFN = Read The F* News, which is what any long-term investor
should do.
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