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

To: Dale J. who wrote (13453)	1/14/1999 5:13:00 AM
From: Charles Tutt	Read Replies (1) \| Respond to of 64865

Dale - Thanks for the compliment. I try to be reasonable. I'll repay your flattery here with some rationale for why I remain long SUNW. I'm always concerned about overvaluation. And SUNW is certainly not as good a buy now as it was a few weeks ago at 40 (when, in fact, I bought more), or a few years ago at 4 (split adjusted, when I bought my first block of SUNW). But I see some (actually, a lot of) real positives: PRODUCTS As I pointed out here a while back, the big unanticipated story this year may be the extent to which Sun penetrates the consumer market (not necessarily in a way that's obvious to the consumers, though -- things like cell phones or, as we saw today, televisions; don't be surprised if automobiles are next, or perhaps home audio). Pervasive/ubiquitous computing is the trend. Also don't forget telecom, an area in which I think Sun is fairly well known and in which announcements have just been made. Sun is in the sweet part of a new product cycle. Darwins all the way to E10000's, plus the current storage offerings and even JavaStations, are for the most part quite new products. I think large capital expenditures are typically on 6 or 12 month budget cycles, so some of these products may just now be ripening. Java and Jini (which is technology enabled by Java) is really pretty slick, and could revolutionize the way we deal with computer peripherals. It seems like everywhere I turn I encounter Java. I don't think they've even announced yet all the products we were shown at the shareholders' meeting (although I could have missed some announcements); I'm going to honor the nondisclosure agreement we were asked to sign and leave it at that. COMPETITIVE POSITION IMHO the problems of the Wintel faction are real. Merced seems likely to perform less well than earlier expected (note HP's decision to extend the PA-RISC line); Win2000 contains huge amounts of new code which will likely need a few iterations in order to stabilize even after it's eventually released; the DOJ is deflating the image the public has of Microsoft. IMHO Microsoft is in a no-win situation in the trial. Even (perhaps especially) if they prevail, the PR damage will have been done. They might actually be better off losing, so they can at least look like the underdog rather than the bully. One nice thing about Sun from an investment standpoint is its relatively small size. An increase in revenues that would amount to only about 13% for IBM would roughly double the size of Sun (using trailing numbers -- this is just an example, anyway); put another way, if Sun were to capture a mere 13% of IBM's business, it would show a 100% revenue growth rate. FUNDAMENTALS IMHO Sun has a sterling balance sheet, and (especially compared to its peers) excellent fundamental measures (like P/S, P/E, PEG, etc. -- one that attracted me to Sun initially, and which I think is still often overlooked, is revenues/employee). FWIW, I think Scott McNealy has recently pointed out that Sun's research budget is quite large -- that's the ultimate source of future products and growth. MACROECONOMICS (of course, these factors benefit others as well) Interest rates and inflation are low, and we're finally getting the "peace dividend" everybody was talking about a few years ago -- even including government surplus! Some believe Asia has bottomed. The Euro should "grease the wheels" in Europe. The Yen is getting stronger (improving the exchange rate at which local currency profits get converted to dollars). CONCLUDING REMARKS On the few occasions I've sold SUNW shares, I've always regretted it. Compare Sun's long-term performance to, e.g., MSFT. So overall I'm bullish. Sure, SUNW may dip. If it dips deeply enough, I'll buy more. If it were to suddenly pop another 30 or 40 points from here, I'd probably sell some. Hope that helps. DISCLAIMER This is all Just My Humble Opinion. Everyone should do their own research and make their own decisions. I own a substantial block of SUNW, which may cloud my vision somewhat <g>.