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

To: alydar who wrote (34962)	8/31/2000 4:19:18 PM
From: Lynn	Read Replies (1) \| Respond to of 64865

Thursday August 31, 3:32 pm Eastern Time Forbes.com Sun Defies The Odds By Lisa DiCarlo Sun Microsystems is a company that defies the odds. Just when the marketplace thinks the company can't succeed without wrapping its arms around the status quo, it comes back stronger and thumbs its nose at detractors. The 18-year-old Palo Alto, Calif., company's stock will probably set a new milestone soon and surpass its all-time high of $128.62. It was trading at $127 this afternoon. It's even more impressive when one considers that bigger companies like Hewlett-Packard (NYSE: HWP - news) and IBM (NYSE: IBM - news) are making a concerted effort to steal its business. Still, Sun (Nasdaq: SUNW - news) continues to beat expectations. Fiscal 2000 sales (ended in June) were up 33% to $15.7 billion, and profits were up almost 50% to $1.72 billion, driven largely by the strength of its Unix server business. The stock has split four times in five years, and a fifth split is on tap for later this year. All this has made a billionaire out of Scott McNealy, the company's co-founder and chief executive. With a net worth of $1.1 billion, he made his first appearance on the Forbes 400 last year. If Sun's performance is any indication, he's sure to make a comeback. Conventional wisdom says that Sun can't maintain its growth in the face of the competition it's getting from all sides. While it's not likely to record 33% growth every year, 25% isn't unreasonable. At that rate, Sun will top $20 billion within two years. Why? Unlike another Wall Street darling, Dell Computer (Nasdaq: DELL - news), Sun isn't threatened by a slowing market. As long as the Internet continues to grow and service providers build capacity for communications, there will be demand for Sun's products. Sun's threat comes from competitors. And there are many. ``Everybody, and I mean everybody, is pointed toward the Internet infrastructure market,'' says Richard Chu of SG Cowen in Boston. In Unix servers, IBM, HP and Compaq Computer (Nasdaq: CPQ - news) have redesigned their products to compete more effectively against Sun. But they haven't made a noticeable dent in Sun's business. On the contrary, Sun's Unix server growth continues to outpace theirs. Chu says the biggest threat will come from cheaper but high-performance systems running Microsoft (Nasdaq: MSFT - news) software and Intel (Nasdaq: INTC - news) chips. But here's the thing: Analysts have been saying for years that Sun, which sells only systems running its own chips and software, will have to capitulate and support other platforms. It hasn't happened. In fact, Sun has thrived with this strategy. The general consensus was that ``survival [of a computer company] is dictated by their ability to play into the majority,'' says Chu. ``But the big change is coming from those filters being thrown away. The litmus test we're adopting today is not necessarily one of compatibility with majority of [Windows] applications but whether [a company] can thrive in [building] Internet infrastructure.'' It's that shift--one that focuses not on a beefy desktop computer but on the network and Web services--that plays directly to Sun's strengths. Even Microsoft has become a believer. This summer, Microsoft announced a sweeping strategy called .NET, where the company will eventually sell or ``rent'' software and services over the Web. Microsoft and Intel will introduce more heavy-duty products in an effort to thwart Sun's momentum. Microsoft's Windows 2000 Data Center edition and Intel's Itanium processor will be out this fall. But both are complex products that require lots of testing and evaluation before a customer puts them into production. That being the case, it will be a year or more before sales of the new Wintel platform gains enough steam to counter Sun. Plus, ``Sun executes better and has less luggage,'' says Chu. Consider that Sun is executing well despite the lack of a new SPARC chip architecture. SPARC is the chip that runs inside its servers, and while Sun says a new version of the chip is on schedule, those familiar with the plans say it's been delayed. One challenge for competitors lies is getting Internet companies and service providers to think of them, not Sun, when buying the infrastructure for their businesses. The challenge for Sun is fending off competition while managing Wall Street's expectations. A scrappy company to the core, it has more experience with the latter. biz.yahoo.com Lynn