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Technology Stocks : All About Sun Microsystems
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To: Badger who wrote (84)1/11/1997 2:41:00 AM
From: Senthil Sankarappan   of 64865
 
Regarding Oracle getting battered:
Badger,
I understand your concern but I think beating in Oracle is justified because of its P/E. I don't know why Oracle's P/E is close to 40 when the company's growth is less than 40%. When you have sky high P/E, then the penality is also high when you disappoint. I haven't seen Oracle giving surprises big time in the past couple of quarters. This quarter they did 1c less, last qtr just met and previous qtr just met or 1c less. What is happening in Oracle is the P/E adjustment. No doubt it is still a growth company but the stock has gotten ahead of the growth. That's it.

But look at SUN's case. P/E is like 20 when there is acceleration in revenue growth. Last quarter they showed 25% revenue growth and it is more than the growth rate of previous quarters. They are giving nice earnings surprises for the past 2 years. With Java hype their potential for revenue growth acceleration is increasing. Also their market cap is around 10-11 Billion much less compared to MSFT's > 100 Billion and Oracle's 25/26 Billion range.

So, if at all SUN continues its streak which I beleive it should, then we will see more revenue growth and so potential for upside P/E adjustment. So, chances of SUNW going to 40 is more than SUNW going to
20.

Again, my opinion only
-senthil
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