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Technology Stocks : All About Sun Microsystems
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To: Dale J. who wrote (14311)2/12/1999 1:15:00 PM
From: Alok Sinha  Read Replies (1) of 64865
 
Here are some of my comments on the Street.Com article.

1. All large deals have risk associated with it. Wall Street's first reaction is usually euphoric , and reality sets in slowly. The outcome of most mergers is driven by the top people involved in the deal. Based on there past performance, Steve Case and Scott McNealy at least deserve the benfit of the doubt at this stage.

2. I agree with the author on one count - I don't see how AOl will make money (relative to the price paid) off Netcenter advertising in the long run. (I also doubt YHOO and other portals have a business model of profitability that justifies there current valuations).

3. I don't agree with the author's contempt of AOL's consumer strategy. A lot of people who consider themselves tech savvy belittled Microsoft, and do the same to AOL. Clearly, AOL has its pulse on the consumer. That is what matters - you can always buy or build technology over time.

4. Sun is the missing piece of the puzzle as far as leveraging Netscape's corporate assets, and no one would argue that SUN is firmly in the Corporate MIS space. With continued growth of AOL subscribers, sales of SUN servers grow - and the margins on those are quite high.

5. Salomon Smith Barney downgraded SUN at $78 - so I can easily see how he considers the current valuation for SUN high. At least he is consistent in his outlook. I was expecting a downgrrade from him right after earnings, but there was nothing in the earnings that he could cite.

Regards

Alok

P.S. A suggestion on your short SUNW position. Sell naked puts, at t least you collect the premium while SUN stays above the price at which you are comfortable covering.
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