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Technology Stocks : All About Sun Microsystems -- Ignore unavailable to you. Want to Upgrade?

To: A.L. Reagan who wrote (29151)	3/19/2000 10:43:00 AM
From: rudedog	Read Replies (1) \| Respond to of 64865

RE: SUNW margins - my personal belief is that SUNW has correctly determined that they can make "street estimates" with a lower margin while increasing share, and that at this point in SUNW history, the need to make rapid inroads into the dot-com and ebusiness space is more important than earnings - especially since the focus of the street at the moment is so heavily biased in favor of rewarding growth independent of the underlying financial performance. One needs only to look at DELL which went into a holding pattern when growth slowed despite the best ROIC and efficiency in the industry. SUNW was facing a number of potential threats in 1997 and 1998 - the DEC "wildfire" machine was supposed to launch in 1998, the IBM "condor" (the S80 that twister is so enamored with) was on the launch pad, and SUNW had just made a major investment in the CRAY technology which would become the UE10000. Getting validation in the market for SUNW's new position as a "big iron" vendor and getting the critical architectural position ahead of the other potential UNIX "big machines" was a requirement for the larger task of taking SUNW from its position as the leading workstation vendor to the leading infrastructure vendor. When "wildfire" was delayed (probably due to the acquisition of DEC by CPQ and the resulting turmoil) and the S80 met the usual positioning problems at IBM, SUNW had a golden opportunity to take and hold the high end mindshare in UNIX, and they have done that very effectively. As long as they continue to execute on their roadmap, they should be able to enhance margins both by moving more product sales "upstream" and by less aggressive pricing on their big system sales. I believe that CPQ is also a worthwhile investment based on the performance of their enterprise business, which on a purely financial basis is quite a bit better than that of SUNW... but the value of "mindshare" is obviously more important than what's happening on the ground, as reflected in the stock price of the two companies.