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

To: Sonki who wrote (14101)	1/30/1999 9:38:00 AM
From: John Carragher	Read Replies (2) \| Respond to of 64865

Its stock has soared on the growth of the 'Net, but could be pricey Review \| Preview Follow-Up: Swede Deal \| Follow-Up: Priceless Fund Just about everything seems to be going right for Sun Microsystems, which wasn't exactly the case when Barron's looked at it a little over a year ago ("Rising Sun," January 5, 1998). At the time, its stock was off nearly 25% from its peak, amid a rout in technology stocks and an earnings disappointment. But Sun's shares have nearly tripled in the past year, to 109 5/16 last week. And like so many hot tech stocks recently, Sun announced a 2-for-1 split, effective in April. Much of that reflects the Internet boom, which helped spur a 30% revenue gain for Sun's high-end "servers," which manage large networks of personal computers and other machines. Its Java programming language -- which allows computers of all varieties to communicate and share programs -- has now been adopted by nearly a million software developers around the world and has become ubiquitous at thousands of Websites. And Sun's recent alliance with America Online, which acquired Netscape Communications for $4.2 billion in November, ensures at least some $500 million worth of hardware and software sales to the world's largest Internet content and service provider in coming years. And as a key witness in the Justice Department's case against Microsoft, Sun's feisty and combative CEO Scott McNealy has the satisfaction of seeing his archrival, Bill Gates, repeatedly in the hot seat. "Sun is amazingly in sync with all of the most exciting trends in the market," says Laura Conigliaro, technology analyst with Goldman Sachs. "That is why they have got such a leg up on their competition." Conigliaro and other analysts feel that Sun soon may come to dominate the markets for Internet use and electronic commerce. Its recent decision to give away the source code to its fast-growing Java language was widely seen as a clever move intended to accelerate the flow of new Java-based software products into the marketplace in an effort to subvert the dominance of Microsoft's Windows operating systems. Despite Sun's undoubted success and continuing strong earnings growth, however, some industry watchers are starting to feel the stock has gotten ahead of itself. "I'm very nervous about setting any new targets because there has just got to be some downside risk right now," one analyst confided recently. Any bad news about the tech sector, he reasons, could hurt Sun through guilt by association -- even if the company continues to thrive. A number of major brokerages have downgraded Sun's stock over the past month, due to its heady valuation -- about 39 times First Call's consensus estimate for the June '99 fiscal year. And Microsoft, as is its wont, has compensated for its late start on the 'Net with sheer numbers. Its industrial-strength Windows NT system has made inroads against Sun's UNIX-based servers. And Sun's dream of stripped-down JavaStations has been subverted by the emergence of full-fledged PCs for as little as $400. Over the longer term, however, prospects are bright. New agreements with France's Alcatel, Japan's Sony and Matsushita and the Netherlands' Philips give Sun a real chance to cash in on coming "smart" programmable gadgets, including cellular phones, screen phones, smart cards and Web TVs -- all markets Bill Gates is desperately trying to break into. And as a leading provider for the backbone to the 'Net, the sky may be the limit for Sun. --Richard Evans