Thursday, January 26, 2006

The Big Picture

When you consider Sun has annual revenues of $13bn, a quarterly loss of $200m isn't so bad. And when you consider Sun spends $2bn on research annually, you can see where the loss comes from.

So is the research worth it? Given that the T1 Niagara processor is world-beating at web workloads, and that its successors are on track for 2007 delivery, things are looking good for Sparc. The new Galaxy servers are gaining momentum. Sun is 6th in shipments of X86 servers, pushing for 4th by end of year. And Sun is talking about a return to Blade servers before the summer. Now that's a market Sun would like to shine in!

So maybe the research is beginning to pay back? It looks like the market is reading things this way, since the share price is holding firm despite the loss. Personally, I'm on the lookout for ZFS and new storage technology, but that's just a rumor...

Tuesday, January 24, 2006

Disappointment

Now I understand why I'm not a paid analyst. They said Sun would post a loss and they were right. Sad. Sad. Sad. Scott - wake up and smell the Java! Profit is not a new fashion - it's your raison d'etre.

Monday, January 23, 2006

Earnings

Today Sun posts its quarterly results. Most analysts predict a 1c loss per share. I am predicting a 2c profit per share based on new product growth, Sparc stability, and Storagetek integration. Let's see who is closer to the actual posted result. If anyone is interested, I'm happy to consider consultancy to any major investment bank. (I have history with UBS).

Thursday, January 19, 2006

AMD revenue begets Sun profits?

AMD has posted a 45% increase in revenue to $1.84 billion (an increase of $570 million). How much of this can we attribute to Sun's Galaxy servers (X2100, X4100 and X4200 SunFire servers)?
Let's take a low, medium and high estimate to guess the impact to Sun's results due out on January 24th.


Optimistic


Assuming 50% of the AMD revenue increase was due to Sun servers, that means Sun spent $280 million MORE on AMD Opteron chips. Now assume that this accounts for half the unit cost of a typical server, which means Sun shipped an extra $1 billion in Galaxy servers, of which half is profit (if Sun maintains its margins). Tasty!

Realistic


Let's say 25% of the AMD revenue increase was due to Sun servers, meaning Sun spent $140 million extra on AMD Opteron silicon. Assuming it accounts for half the unit cost of a typical server, Sun shipped $500 million or so in its Galaxy line (assuming 50% margins).

Pessimistic


If only 10% of the AMD revenue jump came from Sun purchases, then we're looking at just $50 million of extra chip spend, equalling say $200 million in Sun revenue incease.


Whichever way you look at it, Galaxy is driving profits at Sun unless Sparc revenue is losing ground to Power and Itanium. Today, news.com say that Itanium is losing backwards compatibility with X86, except via emulation software which takes it down to current Xeon speeds. And with the new T2000 Sparc servers looking so tasty, Sun may finally be IN THE BLACK. Buy SUNW before 24th!

Friday, January 06, 2006

2006 is looking good for Sun!

In the past week, Sun has received some excellent feedback from all quarters:

The Register


Their Reader Study (free PDF) ranks Sun above IBM, HP, Microsoft and Dell. They even quote a Sun customer as saying "Just reinvented my world with Niagara - I'm having to wipe the drool from my keyboard as I type this."


It's not all good news though - the C-level decision makers are not as keen on Sun as the rest of their organisation staff, so there is a communication issue for Sun to look at.

eWeek


In their Top Products of 2005 report, eWeek include Sun's Solaris 10 operating system, and Java Studio Creator 2 Interactive Development Environment (IDE). That's a really big achievement against some excellent Linux distros (e.g. Red Hat) and the popular IDE Eclipse.

InfoWorld


In their 2006 Technology Of The Year Awards, InfoWorld award the new SunFire T2000 Server as the most innovative server of the year. (Unfortunately for Sun, IBM and HP pick up the other 2 server awards).

And the market?


Well, all this good news and a sprinkling of speculation pushed the price of SUNW stock to a close of 4.71 on Friday - not bad at all! Expect further rises with good news about Open Document Format (ODF), ZFS and other technologies as Sun begins to find its stride and post some profits.