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

To: cheryl williamson who wrote (11203)	10/1/1998 11:32:00 PM
From: brian z	Read Replies (1) \| Respond to of 64865

I guess SUNW share holders like to read this (from The Street.com) Silicon Valley: Time Isn't on Microsoft's Side By Medora Lee Staff Reporter 10/1/98 4:22 PM ET SAN FRANCISCO -- Microsoft (MSFT:Nasdaq) may have played vaporware for the last time. Delays from the Redmond, Washington, software giant are something companies have gotten used to and have put up with many times in the past, but things now may be changing. When Microsoft delayed its second test version of Windows NT 5.0 in July, some industry watchers warned of consequences. David Readerman, Microsoft analyst with NationsBanc Montgomery Securities, wrote in his report: "We expect this NT 5.0 slippage will negatively impact large enterprise, higher performance NT-application sales ... in favor of UNIX alternatives." Readerman kept a buy rating on Microsoft then but lowered his fiscal year 1999 earnings estimates of NT sales from $3.6 billion to $2.9 billion. Nationsbanc Montgomery Securities has no underwriting relationship with Microsoft. Most industry watchers are betting that the final NT 5.0 version will not be delivered until late 1999 or even sometime in the year 2000. The arrival of NT 5.0 is key to Microsoft's future growth because it is the company's chance to attract larger corporate clients, who generally have relied on mainframe computers or UNIX-based operating systems. Windows NT 5.0 is promised to be more powerful and scalable (capable of being changed in size and configuration) than the current version, Windows NT 4.0. Furthermore, NT 5.0 is also said to offer a whole bag of goodies such as Internet capabilities and an active directory, allowing computer users and other software programs to find other users, databases and resources in large computer networks. But as Microsoft delays NT 5.0 to "fine-tune" some 40 million lines of code, others are stepping up to meet customer needs. Take Novell (NOVL:Nasdaq), which had a near-death experience after losing market share to Microsoft. Novell, which specializes in software that powers networks of desktop and central-server computers, is already exploiting the window of opportunity left open by Microsoft. It shipped ahead of schedule NetWare 5, an upgrade of its flagship operating system that focuses on the Internet and provides a scalable directory. Novell says the market is interpreting the Windows NT 5.0 delay as a signal to renew its commitment to Novell. Any delay is bound to be good for Sun Microsystems (SUNW:Nasdaq), the market leader in UNIX-based operating systems. Sun used to own the midrange and high-end server and workstation market. But the combination of cheap workstations based on Intel (INTC:Nasdaq) chips and Windows NT software has dented Sun's domain. "Sun continues to gain ground in the UNIX market, while the Wintel [Windows/Intel] threat drifts further into the future," says Kurt King, an analyst at Nationsbanc Montgomery Securities who rates Sun a buy. Nationsbanc Montgomery Securities has no underwriting relationship with Sun. John Oltsik, an analyst with Forrester Research, goes further, saying "We're recommending that people not put NT 5.0 into production until 2001, in terms of infrastructure. With about 20 million new lines of code, we think Microsoft will have a lot of patchwork to do. The move from NT 4.0 to 5.0 will be a difficult transition." Nationsbanc's King agrees. "We continue to find little interest in migrating enterprise UNIX applications to the Wintel platform within the next two or three years, particularly given the need to deal with Y2K issues in the interim." In the meantime UNIX continues to outperform NT. A Morgan Stanley Dean Witter study shows that UNIX servers are actually outperforming Wintel servers. Morgan Stanley analyst Thomas Kraemer says, "UNIX servers are actually pulling away." Morgan Stanley Dean Witter has no banking relationship with Sun but has participated in public offerings for Microsoft. As businesses move toward the Web, they are looking to UNIX servers for their reliability. For example, clothing retailer J. Crew replaced 30 NT servers with 5 Sun Solaris systems in July to power its e-commerce Web site. "If your Web server can only handle 1,000 hits and your site got 1,500, you just lost 500 customers," Kraemer says. Jonathan Perera, Microsoft lead product manager for Windows NT servers, puts on a brave front. He argues that NT scalability is comparable to UNIX but that NT provides a higher level of performance for the price. When NT 5.0 is released next year, Perera says Microsoft will be able to capitalize on its huge NT 4.0-installed base. Hambrecht & Quist analyst Chris Galvin believes Windows NT will remain the favorite over the coming years and continue to chip away at all other platforms. Hambrecht & Quist has no banking relationship with Microsoft. "We are still early in seeing the success of Windows NT," he says. "The trend of Microsoft gaining ground and increasing its market share with a more expensive operating environment seems to be what should be expected over the next few years." Should you bet against Microsoft? "You have to remember, the best technology doesn't always win, and Microsoft is big." says one fund manager who owns small positions in both Microsoft and Sun. But this could be one delay too many. Morgan Stanley's Kraemer bets that "when Wintel finally does deliver scalability, we think the odds are good that many partygoers will have moved [to UNIX]."