Original URL: https://www.theregister.com/2003/07/23/suns_shares_tumble_the_loon/

Sun's shares tumble, The Loon grumbles

The end is near. Is it?

By Ashlee Vance

Posted in Systems, 23rd July 2003 15:59 GMT

Sun Microsystems shares took a serious hit in the early hours of Wednesday trading, opening the door for Merirll Lynch's top server analyst to wax eloquent on Sun's demise.

Sun tends to post its best results for any fiscal year in Q4, and true to form, it did. The problem is that the numbers posted by Sun on Tuesday came in well below previous year's Q4 totals. Investors are starting to worry that Sun's share of the server market is shrinking and may not come back.

Sun's stock has tumbled 20 percent, at the time of this report, to $3.89 per share. This fall erases several weeks of gains in Sun shares that had sent the price above $5 per share for the first time in a long while.

Anytime Sun has a slip up, Merrill Lynch analyst Steven Milunovich comes running to make sure everyone knows how dire the situation really is. He puts on his cute, schoolgirl outfit, gets giddy and starts to ramble on about the end being near.

Sure enough, a note appeared from "The Loon" - as he is known at El Reg - chock full of witty barbs. Miloonovich tends to nail Sun to the ground in its bad areas and to turn positive signs on their head. Case in point.

"Cash flow was terrific with $1 billion of operating cash flow generated for the year," Miloonovich wrote. "Sun is performing well as a bank, less impressively as a computer company."

Chuckle, chuckle. Sigh.

Miloonovich likes to suggest that Sun may well become or already has become "irrelevant." Irrelevant seems to be his word of choice for Sun.

The glory days for Sun have surely passed, as they did for the vast majority of tech companies. Server sales have slowed dramatically, which makes it tough for Sun to beat year-on-year compares.

If any type of recovery begins, Miloonovich will tell you that customers will pick up gear from IBM, HP and Dell at a faster clip than Sun kit. He sees Sun as a bit of a dinosaur.

Keep in mind that this is the same fellow who once championed Sun and EMC for their "proprietary" architectures during the boom. The Loon loved Sun, so much so that he would hike Merrill's rating on the company to many, many times its earnings.

He even chastised Sun CEO Scott McNealy for not telling investors what they wanted to hear during the dot-com hey-day. Sun did silly things such as taint its robust earnings with dollops of conservative talk and not count revenue from dot-coms or ISPs until the money actually entered Sun's coffers. Miloonovich wanted more from Sun, but McNealy would not give it to him.

No matter. Merrill stuck by the company and said it would be an industry darling for years to come.

Fast-forward to 2002, and Sun is irrelevant. Yes, it leads in Unix market share and pumps out billions in revenue, but times are changing. Sun will be crushed by "industry standards" such as the Itanic processor. Well, duh, Steve, the numbers don't lie.

Sun faces incredible challenges to boost growth. That much is true. It needs to pick up its software sales, hold onto its Unix lead and successfully expand into new markets such as 32bit Intel servers and Linux systems.

But who is to say Sun can't pull this off? It has done it before and may well do it again.

The point is that investors are always taught to look at the long term. Analysts such as Miloonovich that have chafed asses from jumping on and off bandwagons so frequently, don't help shareholders one bit. Maybe it's these types of analysts that are irrelevant.

Miloonovich seems to take pride in bashing Sun these days. We wonder how much time he spends thinking up his witty lines or if some underling provides this comic relief for him.

Don't be a one-trick pony. Help investors see the long-term picture and emphasize that industry battles are not won or lost in a couple of years. Big changes take time.

Should Sun's bets pay off, don't be surprised to see The Loon trying to slink back into Sun's good graces. He'll be hyping the stock once again and driving the industry standard Itanic into the ground. ®