To: paul who wrote (11325 ) 10/15/1998 11:57:00 PM From: Scott Kessler Read Replies (1) | Respond to
SUNW puzzles me. Seems to always hit its #s (except Q2 '96), but the stock doesn't move that much to upside on the good news. Perhaps it's SUNW's lower p/e & espected growth rate (as compared to bell-weathers MSFT, CSCO & EMC, but INTC is more volatile w/ comparable #s), the perceived threat from MSFT, or the fact that lots of folks don't know what the heck this co. really does. Don't know. I held shares for some 3 yrs. before I sold out recently. Took the money & poured it into CSCO & EMC, which last wk. were both significantly off their highs. I like SUNW & their management, but see some signficant probs. looming. 1) Co. can't continue the way of IBM & be a hardware, software & semi manufacturer. Many cos., CSCO and EMC included, are using their hardware platforms to develop strong software & services bizs, but SUNW's manner of horizontal integration detracts from co. focus. 2) Whether SUNW likes it or not the NT servers are a comin', and the servers are SUNW's bread & butter. 3) Java will prob. succeed, but its much more hype than $. SUNW will make more in ancillary Java services than license fees. 4) Think a lot of the good news is factored into stock -- delay of Merced, Java acceptance, service & storage inroads, SUNW servers powering Net, etc. 5) Despite good rev. #s, I believe SUNW's margins were a little weak, not surprising considering price pressure co. is only beginning to feel. 6) Co. relies on Japan moreso than other tech. cos. Obviously many of these points are debatable, but my conclusion is the risk-reward ratios for CSCO & EMC are much better than that of SUNW, and both of these cos. DOMINATE THEIR MKTS., something that cannot be said of SUNW. Last wk., all 3 of these stocks were in the mid-40s, w/ PEG ratios at about 1. Now CSCO & EMC are in the mid-50s. I wouldn't be surprised if SUNW closes BELOW, yes BELOW $48 tomorrow, as other investors, like myself, believe this is the best it's gonna get for SUNW.
