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

To: QwikSand who wrote (63902)	7/4/2006 8:01:18 AM
From: Rink	Read Replies (3) \| Respond to of 64865

Qwiksand, not exactly. SUN derives profits from software, SPARC hardware, storage hardware, and Opteron hardware. One of the major pillars, SPARC, is and will continue to decline. SUN sells Opteron because that allows them to continue selling their software profitably, not because Opteron systems would be anywhere nearly as profitable as SPARC systems. So as long as Opteron systems just take a larger percentage of the SUN's server hardware sales, AND their server sales would remain largely steady, it means decreasing profit margins. Yes SUN is cutting costs to the tune of $500M but I am not sure that it will be enough to counter decreasing margins caused by SPARC declines. Please consider that if you are sure this will suffice you should also be sure about how much server profits decline during that same period. Because I don't know the latter I also am not sure about the former either. On a bit higher level: SUN has not presented a complete solution for SPARC declines. IMO the street thinks there is a too significant chance that SPARC declines will last till nothing is left in say six years from now. Niagara is a complete niche processor that is not gaining that much traction. Rock will not materialize for a while and is till that time subject to healthy scepticism. SUN is not admitting this as a possibility and hence has presented a cost cutting plan to take them to the Rock era (like I think they should). Still I think most investors are cautious, and want some evidence first (maybe I'm overstating what I think myself, but I think the chance of that isn't high). IMO there is not that much rear view mirror about this major event happening between start '05 and start '08. Regards, Rink