Something to consider for SUNW's valuation..by: jabtlb
The traditional numbers are out the window for this stock.
After NT 5.0's major, major delay, and the recent announcement that they may scrap this version and
move to the next version, also with NT combining name recognition with the P/C Windows environment.
Also, with the extended delays in the Merced Chip, has all been enormous positives for SUNW.
Originally, Money Managers were waiting to see this latest quarter to see what kind of effect it had on
SUNW. Well what they found was a complete shock, SUNW has an enormous backlog, coupled with the an
unprecedented increase in demand. Their inventory levels had shrunk, their Acc. Rec had almost doubled,
but all within 60 days, and sales were flying. In two of their prospective server industries SUNW was
seeing 30%+ growth. Lastly, the increased profit margins, and lowered cost.
It has come to everyones attention that SUNW is reaping a windfall from MSFT's ineptness. Additionally,
SUNW comes out with the 64bit Solaris, the first 64 bit of its kind, and is preparing to take marketshare in
even bigger chunks then originally perceived. MSFT is losing alot of its clout as a reliability maker. Also,
with SUNW's move to make make their system capable for Merced, and working with IBM, and Intel more
closely. It is starting to demonstrate to the world, in particular the money managers, that SUNW has a
potential to grow in the next 18-24 months like never expected. Partially due to competitions inabilities,
and in part due to SUNW's strengths and new product line. In a year and a half, MSFT might find the
high-end server business shut-out, and with SUNW starting to slowly align itself with Intel, well make
the systems compatible to Intel chips. Means that SUNW will be the alternative for ALL systems, not just
the blowhard UNIX fuddy-duddies.
SUNW's concensus earnings Projection for 1999 is $2.78. At $60 I would consider that a discount for a
company that has already exceeded earning expectations once this year. In 2000 the earnings
expectation is $3.36, but that is on normal production and growth tables. Many Managers feel that 2000
could be anyones guess, as JAVA, JINI, and Embedded Systems will really start to produce serious revenue.
There is some big news due out, as SUNW feels that they are starting to gain back the respect they lost
about 3 years ago when they went head to head with MSFT and its world-class media machine
(GE/NBC/MSNBC/CNBC). SUNW is starting to sink its claws in and go for the kill, even MSFT the usual
savvy company that puts its own spin on everything, is showing signs of flinching. They have been shown
in court to be frightened of JAVA, and admittedly years behind in the technology, they are not even close
to SUNW for a 64 bit system, in the embedded market SUNW is the early clear-cut leader, and SUNW is
growing its alliances to include some old MSFT allies.
The past 2 weeks have been positive, the stock in the prior 18 months would have had substantial
retreating after such a rapid run-up. But instead SUNW has exhibited signs of a company that is basing,
gaining momentum, building a new resistance level above it's all-time high. Preparing for another
run-up. I think SUNW can be fairly valued between a 28-30 P/E ratio. Because this is the new market,
investors don't want to be left in the cold, SUNW has alot going for it now, more so than in the prior 24
months. This needs to be added to the value, and increase the P/E potential. SUNW has had some rapid
profit margin increases from quarter to quarter. Investors are sticking with SUNW now!
I picked this up on the yahoo board. Thanks to Jab. |
