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Sunnier Days for Sun?
04/04/2003 12:00 am EST
"Despite current problems, I believe Sun Microsystems (SUNW NASDAQ) has the potential to be among the major computer companies," says Michael Murphy, in a special supplement to his Technology Investing. He recently attended their latest analysts' events and walked away, in his words, as impressed with the comprehensive plan as he is with its three core strategies. Here's his latest outlook on the company's future.
“Let’s look at the company’s three core strategies. First, the company wants to manage all network hardware as a pool of resources that can be allocated as necessary to complete specific tasks at hand. Second, the company wants to speed up network deployment. A newly announced project called Orion delivers all of Sun’s software assets as one suite, which makes it easy for customers to add applications as needed. Sun can simply turn the new application on once purchased by the client, as they are already connected to the machine. Third, Sun wants to unleash mobility with security, and Java is the final piece of this puzzle. Sun hopes that Java will be the platform of choice for developers working on Web services and functional mobile devices like cellular phones and handheld games. (We must note that Sun’s lawsuit against Microsoft to have Java included with Windows has not yet been resolved, but we believe that Sun will ultimately prevail.)
“As noted, the newest initiative is Orion. I believe it will be successful because all of the components already exist at Sun. However, there are two new elements to its strategy. Sun will now only release new products once a quarter to make it less confusing for customers, and they also intend to move to subscription pricing (much like Microsoft) in order to generate a more predictable revenue stream. Eventually, we expect Orion to be available on all three Sun-supported operating systems – Solaris and Solaris x86, Unix (which runs on Intel chips), and Linux.
In the meantime, it is the hardware side in which Sun really shines. First, Sun remains the king of UNIX platforms, which are the high-end hardware of choice. Despite competition from the likes of IBM, I believe UNIX should remain the top high-end server provider for long time. Second, although Sun admits to being late to enter the party, Linux is now presenting the company with opportunity. Linux is now the most popular operating system in the mid-and low-end hardware area. Sun now has its own Linux server and is following Dell’s model of excellence in supply chain management to reduce costs and lower prices.
“Finally SPARC is critical to
Sun’s overall success. These are the most powerful chips available designed to
run the UNIX system, where Sun dominates. The next step is so-called
multi-threading on the chip so, it can process multiple jobs at once. This gives customers more bang for the
buck by reducing the need for additional chips and servers. Sun also believes it
has a substantial lead in the newest generation 64-bit microprocessor. Yes,
there are many moving parts to the Sun story, and any missteps could seriously
hamper the company’s prospects. The company also has $5 billion in cash to
successfully meet its challenges.
investors, I recommend buying this stock up to $6 per share.
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