twister - re: You don't have a histrocial perspective on the effect of what happens to higher priced incumbents when aggressive. lower ASP competitors enter the market.
I'm not trying to be condescending here, but I have been in this business for more than 30 years and have seen S360 eat into CDC, GE, Burroughs, sperry - then VAX eat into s360/370 - then HP and Sun eat into VAX - seen dedicated word processors steal that business from minicomputers, then PCs kill the word processor business - and so on. Each of these was an example of "what happens to higher priced incumbents when aggressive. lower ASP competitors enter the market." And, yes, it does seem like deja vu all over again, and each time there is some young turk who believes that this time it really is different, nothing like this has ever happened before, experience counts for nothing because its a whole new world... but it never is.
I believe that the companies and executive teams who are most successful are those that have a frank understanding of their own strengths and weaknesses, and whether those weaknesses are OK to live with or need to be addressed.
It's fine to say "just make a perfect product" but no one can actually afford to do that. You can't even afford to put too much into a product - each investment needs to be pretty close to "just right" in the target costs, amount of R&D invested to achieve a market goal or deflect a competitive threat.
You tend to black and white in your analysis. I am not saying that SUNW has no competition, that they don't need to counter threats from a variety of sources, or anything like that. The statement was much more simple - on the present playing field, they don't need to beat the IBM S80 to maintain their target growth rates and profitability. I'll go farther and say that an attempt to counter every threat like that would reduce their financial performance. If they can maintain their growth, market share and "architectural dominance" without producing a faster product than S80, or a cheaper product than high end Wintel, then that's what they should do. There are lots of strategic moves that they need to make to transition their business over the next few years. I have discussed my ideas about some of them on this thread. But the notion that there is anything inherent in the current positions being presented by CPQ, IBM, HP, MSFT, Intel or any of the rest which will derail SUNW just doesn't seem likely. Those initiatives will not bear fruit for a long time, maybe years. Sure, there will be shifts and displacements in the market, Wintel will get some of SUNW's low end business, SUNW is vulnerable to a storage play, some magical unification of several of the competing Unix variants, along with a great manageability story would pressure Solaris... If you're saying this is a tough business I will agree.
and re: That's curious way of presenting this since w2k and pIII xeon have only recently hit the market
CPQ's 8-way Xeon box has been on the market for over 9 months - that's "a while" in a world where product cycles are 12 to 18 months... At launch in August of 1999 it had better TPC performance than UE3500 or UE4500/5500 at a much lower cost. The newer products are more competitive yet. The creation of the over-the-top 230,000 TPM-C benchmark clearly shows that these systems can do the big jobs. But as I have said before, performance per se is not the missing link. IBM knows what it would take, they just can't afford to actually go out and do it because they have hugely profitable revenue streams which would be impacted - they would be cutting off their nose to spite their face. So they fight a "limited war". Of the Wintel vendors, only CPQ has the capability to put together a credible product, and they can't do it without MSFT, which has not shown me that they care about anything but the volume business. That may change, maybe even this year, but the results will not spell doom for SUNW - it will simply mean that SUNW needs to redeploy some resources to counter the threat. Maybe they'll do that successfully, maybe not - but I will for sure have pleanty of time to sell my LEAPS...
re: You don't appreciate how aggressively msft/intc;hp; and IBM are attacking this.
I probably appreciate a lot more than you suspect - and could give you chapter and verse on what each of those companies is attempting to do, what their internal and external impediments to success are, what resources they can realistically bring to bear, and what that will mean in market share terms over time. But I won't - that's what I get paid to do, not what I do for fun. However, I reflect my understanding with my investments - 8% of my portfolio is in MSFT, more than 10% in INTC, 10% in DELL, 15% in CPQ... and now a small play in SUNW LEAPs. I don't happen to think that this is a zero sum game.
YOu are, as I suspected BETTING On the mindless momentem continuing; and the STORY holding together for the duration of your BET.
Correct - except that I don't think the momentum is mindless, just not based on fundamentals. SUNW has a unique position in the industry at the moment and they could make that pay off or they could blow it. Right now, it seems like investors believe they will achieve at least some of that potential.
As a TREND follower, and not someone with a grasp on the financial models of each competitor and how that influences product prices, you will be as SURPRISED as the next analyst of the significant competitve challenges just over the horizon.
Perhaps with a deeper understanding of these companies, I could have done better than I have, but I am frankly too lazy... I get a simple model that works for me, and try to have some fun. Still, I am up 350% since 1996, which means I don't actually have to work for a living any more. I don't confuse a bull market with investment savvy... as I have said many times, just an engineer who got lucky. So maybe there would not be much point in doing a deeper analysis - I might fool myself into thinking I know something about investing, and that would be dangerous. |
