To: MythMan who wrote (66250 ) 10/4/1999 4:33:00 PM From: Cynic 2005 Respond to
Y2K may or may not be a non-event. But what is certain is that Y2K related "excessive" spending is a thing of the past. As Y2K issue is past, there is no incentive to keep on spending on technology. SunGard is also experiencing a Y2K induced slowdown in enterprise spending. SunGard said as much when it warned that license sales of derivatives and risk management software would hinder performance in the quarter even though sales of its disaster recovery and computer services products would not be hurt by this year-end phenomenon. Accordingly, the company expects Q3 earnings to be in the range of $0.30 to $0.33 per share, below the First Call mean estimate of $0.37. In the year-ago period, SunGard earned $0.31. At the same time, SunGard warned that full-year results would come in between $1.32 and $1.38 per share, below the First Call mean of $1.43. Yet, despite the sales and earnings shortfall associated with its brokerage, investment management and insurance management software products, the company reaffirmed its long-term goal of 20% earnings growth for fiscal 2000 as the slowdown in sales is viewed to be temporary in nature, associated with the end of the millennium. The Y2K news, however, has not been well received by market players as the stock is now trading at lows not seen in almost three years. To be sure, Y2K concerns have dogged the stock for the past several months and prevented the issue from realizing its full potential. Even with the revised earnings estimates, the stock is currently trading around 12 times projected 2000 earnings of no more than $1.58 per share. Should SunGard be able to resume its 20% earnings growth next year, especially as SunGard launches more Internet-based treasury management software solutions in the coming months, the stock appears to be oversold considering that its comprehensive computer disaster recovery services are still expanding at a healthy pace. Thus a bounce in the stock in subsequent days should be anticipated as the company seems to have cleared the deck of any short-term negative news. - RN
