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

To: E_K_S who wrote (15030)	3/29/1999 9:26:00 PM
From: E_K_S	Read Replies (3) \| Respond to of 64865

To Thread - Good news from SUNW... I received a response from SUNW's IR regarding their $500 million shelf debt financing and the possibility of providing a convertible preferred offering instead of the standard debt placement. I was told that as a result of SUNW's free flow cash flows being so strong, they would be able to finance their new facilities from current and future cash flows. The shelf debt issue was a formality so if needed, they could utilize the debt market. So far, management sees no need to utilize the debt market (it's there if they do). Their current and estimated free flow cash flows are so strong they do not need to use the debt option! According to IR, management sees SUNW as a growth company, never needed debt to finance their growth in the past, do not expect to utilize debit to finance their growth for the future and do not plan on paying any dividends in the near future. The do plan on strategically investing their current & future earnings in GROWTH. Therefore, as a loyal SUNW holder, I like growth and no debt. As a result, the long-term holder will eventually recognize long term capital growth as long as those free flow cash flows continue to grow and expand. The market will value SUNW with a higher PE because (1) no debit is necessary to finance future growth and (2) the free flow cash flows invested in new facilities compound and add "real" economic value to this company. The price to sales is the number that counts and at the current price SUNW sells at 4.7x trailing sales and 3.75x next year sales. Since the free flow cash flow continue positive, SUNW can continue to grow in several different niche and emerging markets. I expect future revenue growth will expand at a higher rate than we have seen in the past (i.e. historical revenue growth is about 19%). IMO both the near and long term continues to look very positive for SUNW. Can anybody provide an industry or reasonable Price to sales valuation we can use for SUNW based on the following: Sunw is no longer a hardware company but a hybrid of; (1) software provider (Java, Jini & Solaris) (2) service integrator (i.e. provide custom software consulting and website e-commerce system integration for AOL (like Oracle does for DBMS solutions), (3) high end hardware manufacturer (w/ high margins) and (4) low and mid range manufacturer (w/ customer upgrades to more products & services). My guess is a price to sales ratio in the 5-7 range is resonable. At current per share sales levels that would price SUNW at $132-$185 and future sales are growing at a greater than 20% rate. EKS