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

To: John Carragher who wrote (12147)	11/30/1998 3:07:00 PM
From: Mephisto	Read Replies (1) \| Respond to of 64865

I've also worried over the past couple of years about Sun's future but if I had held onto the good companies that I had owned over the past four or five years, I would have been very wealthy. Someone else on this thread pointed that out as well. I guess it all depends on whether you want to trade or invest. Sun was one company that I had not bothered to trade for whatever reason. Now I am glad that I held on to it. Think the future of Sun looks bright when you look further into the future: "But for America Online --- and for the big Internet players against which it will compete – the real potential gold mines lies farther down the road, perhaps five years away, when people will venture on line for information or shopping not only from personal computers but also from inexpensive Internet appliances costing $200 each, pagers, cell phones and television set-top boxes." From the story by Steve Lohr and John Markoff, published, Wednesday, November 25. 1998 in The New York Times And keep in mind the article from Business Week that Paul pointed out: The deal is also a clear endorsement for Java, Sun's programming language that can be used to create software that can run on any type of computer or operating system. Part of the arrangement between Sun and AOL involves developing low-cost "network appliances" using Java that will let AOL members log onto the service from personal devices and cell phones. Java will also be incorporated into other Netscape software. "This increase in pervasiveness should encourage application developers to write more applications for [Java]," wrote Steven Milunovich, a Merrill Lynch analyst, in a Nov. 25 report. Plus, the more devices there are that can reach the Net, the more servers Sun should be able to sell, points out Morgan Stanley analyst Thomas Kraemer in a Nov. 25 report. "Sun brings the robust back-end, or plumbing, to the party," he wrote. NEARLY DOUBLED. The only cloud in this sunny scenario for investors is that a lot of the recent good news is already reflected in Sun's stock price. Its price has nearly doubled in just the past six weeks. It traded as low as 39 on Oct. 8 and closed at 75 3/4 on Nov. 25. Stalled in the low-40s for much of this year, the stock began to rise after Sun's Oct. 15 earnings report. For its fiscal 1999 first quarter, Sun reported net income of $198 million, a 21% boost that exceeded Wall Street's expectations. Investors cheered again on Nov. 17 when Sun won an early round in its suit against rival Microsoft (MSFT) over an alleged violation of its Java licensing agreement. Since the news of Sun's role in AOL's deal with Netscape began to surface on Nov. 23, Sun's stock price has risen further. It's approaching the price targets set by several Wall Street analysts, though these seers are revising their numbers upward. Even though the deal is not expected to add to earnings in 1999, some analysts believe that Sun deserves a higher multiple since it is now becoming more of an Internet play. In his Nov. 25 report, Kraemer rated Sun a strong buy and raised his price target to $85, or 28 times his 1999 earnings estimate. "While this blows past Sun's historical trading ranges, the potential markets Sun is pursuing are enormous," he wrote. Milunovich boosted his price target on Nov. 25 to $86. "This new announcement shows that there are a lot of new opportunities open to Sun and argues for a higher valuation," Graham-Hackett, agrees. Sun can't keep rocketing forward forever. But Kraemer is expecting more good news in early December, when the company holds its quarterly operations review and launches a new Java Developers Kit. And long-term, the deal with AOL could be a step toward making Sun a key provider of indispensable software and hardware for the Internet. "Net-net, there is very little downside," says Graham-Hackett, "but strong potential for very good upside to the deal." John, I've been told that MSFT has traditionally traded at 40 times earnings. So a PE of 28 is hardly excessive.