Sun Going Down

Hi Guys,
Todays news is SUN microsystems(Nasdaq SUNW) is projecting losses. It is down by 18% right now. How does this effect future of Java. Are the job cuts which are taking place accross the Globe also tech workers, or they are mainly manufacturing jobs.
Neha

yes it is quite worrying, looks like this is going to be a recession time.

Hello Neha,
Where exactly did you get this news from?
Manjunath

Originally posted by Neha Sharma:
Hi Guys,
Todays news is SUN microsystems(Nasdaq SUNW) is projecting losses. It is down by 18% right now. How does this effect future of Java. Are the job cuts which are taking place accross the Globe also tech workers, or they are mainly manufacturing jobs.
Neha

http://cnnfn.cnn.com/2001/08/30/technology/techwrap/
The sky is not falling. Sun is a multibillion dollar company. One quarter of losses in a down economy isn't going to significantly impact their 10 year Java effort. Besdies, Sun doesn't try to make any money off of Java (not sersiouly, anyway).
What if they have 2-3 quarters of losses? They'd probably have layoffs, and it may even be heavy in the software group (since Sun is first and foremost a hardware company). But it would just mean Sun's Java efforts would slow, not stop.

--Mark

Manju,
either see at CNN.com or got to http://finance.yahoo.com/q?s=sunw&d=t
Neha

so what sun is not the only one who goes down

Don't let the SUN go down on me...

I was thinking more in the light of the fact that IBM has been asking Sun to let java become an open standard (as in ISO Standard). Is this more of a possibility now..

The share price of sun may was down 18% yesterday -- as the company may be seeing a bloody bottom line for the quarter. However, that does not mean the company is in danger of closing shop or even slowing down -- not by a long shot.
Just two points:
1) Solid and conservative balance sheet.
Debt/Equity is at 0.23 -- very very conservative! 1.0 is normal. 0.23 is phenomenal.
Current ratio at 1.54 -- i.e. more than enough liquidity
to meet current obligations
Total Cash at $1.9bn -- is more than sufficient.
Even if sun does not make a profit in five years the company will still be standing. Sun's market cap is $36,000,000,000. A net loss of $300mn will not be even 1% of the companies market value.
2) Java is supported by other market leaders like IBM, Oracle, Borland, Syamantec, etc.
In a nutshell, Sun's fundamentals reflects a conservative stance that can withstand a downturn in the economy. Should you still fret the demise of Sun; know that Java belongs to Sun but is supported by other Tech industry leaders. I really can't imagine IBM without websphere...

Patricia, your reply was very informative and encouraging. Infact this my main concern was what about IBM which fully supports java. So if SUN goes down IBM should still be there.
Thanks
Neha

Patricia gave a good account of Sun's fundamentals - obviously a lover of finance like myself! I currently own Sun stock so I felt the hurt of the latest bad news. But Sun will be a survivor.
As for the broader economic picture, most economists have described this as a business-led economic slowdown. That means that businesses have cut back on capital spending, most noticeably in the manufacturing sector. Obviously, this spreads to the tech sector b/c the brick-and-mortar manufacturers are spending less on tech equipment. This has hurt names like Sun and Cisco; both companies have high levels of inventory. However, Cisco recently reported that its inventories have been decreasing, suggesting that some companies are beginning to buy new equipment. Keep in mind that we are technically not in a recession, thanks mainly to consumer spending. Retail companies have been posting better than expected earnings while techs have reported losses.
The bottom line: Economists believe that the economy should begin turning around beginning of next year. Even Mr. Greenspan thinks so. For techies, the jobs right now are in IT departments of retail sales establishments. However, the recruiters I have talked with have seen a slight increase in jobs already.
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Originally posted by mohit joshi:
I was thinking more in the light of the fact that IBM has been asking Sun to let java become an open standard (as in ISO Standard). Is this more of a possibility now..

Java is an open standard, but not ISO. Check out the Java Community Process at http://www.jcp.org

--Mark

But there's one question Patricia!!
If the stock prices goes down the market Cap goes down too. So the billion dollars capital can be eroded. I think the value of a company is and should be judged by assets and not market cap. Correct me if I'm wrong.
Neha

Neha,
The fundamental value of a company is based on NET assets. NET assets takes into consideration future cash flows discounted to the present, etc. Yes, you are right the Market cap is not a very good gauge of the real value of a company -- it tends to be higher or lower than the intrinsic value whenever there is too much optimism or too much fear.