The shares of Sun Microsystems (JAVA) have finally slipped into the briny deep. The stocked moved under $10. The last time JAVA was that low was in 2002. Back then it traded under the symbol SUNW. So much for changing the call letters. Or reverse-splitting the shares. 24/7 Wall Street mentioned that Sun would probably go below $10 in the July 7 issue of its weekly newsletter.
Sun now trades at below 60% of annual revenue, which is extraordinary since the company has no debt to speak of. HP (HPQ) trades at about 1x sales and IBM (IBM) trades even higher by that measurement.
There is no new from Sun. That is extraordinary, since the company PR department likes to put out at least one meaningless announcement a day. With sentiment about the company as poor as it is, they may have gone to ground or were laid off in the last series of job cuts.
The market is now fairly clear on one thing. It does not expect any recovery at Sun, perhaps ever. The firm’s future as an independent company is doubtful. It simply does not have the market share in the server business. In the last quarter, its sales were flat and Sun lost money. Management wants to "cost cut" its way to success. Not likely.
Sun’s next quarterly report may be a watershed. It is hard to see the board keeping on CEO Jonathan Schwartz if the numbers are bad. They will have to find an investment bank to shop the company.
The company does not have a future. The best thing the board can do it find it a home.
Douglas A. McIntyre
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