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Technology Stocks : All About Sun Microsystems
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To: Darlene Liebrock who wrote (4)1/2/1997 10:53:00 PM
From: Bill Fischofer   of 64865
 
Sun Challenges for 1997

It seems to me the fundamental reason for SUNW's recent weakness is concern over margin erosion due to Wintel competition. Sun recently cut prices, apparently in response to recent gains by CPQ and others with their NT workstation lines. As everyone in the PC business knows, competitive price cuts are a process, not an event. The question, then, is how "fit" is Sun to slug it out with the leanest of the PC vendors to protect their low end and midrange offerings? If they are determined to "do what it takes" then margins will likely erode. If they try to protect current margins, then they risk eroding the install base. Sun is clearly at a critical juncture. Today's weak response to the Goldman recommendation needs to be watched closely. Compare SUNW's chart with that of SGI's in 9/95 and there is a disturbing similarity.
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