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Could Shel push up Sun’s share price? bloggers and stock pickers.

Could a non-specialist investor blogger have an impact on Sun’s share price?

Sun: A Nice Stock Risk, posts Shel Israel, Scoble’s partner in crime.

Let consider a scenario. Shel has a widespread readership, which could be significantly magnified by the Scoble effect. Could that impact a share price?

Here is what Shel said:

Because of Google’s deal with them, I think a nice high risk-high gain investment is Sun Microsystems, who’s stock has risen from about $3.75 to $4.25 in a short period of time.  It is very early to see how this potential disruption to Microsoft’s OS and Office positions plays out.  And I’m the last person to ask about the financial analysis.  My favorite investments have been historically on paying attention to companies who appear to me in a position to sustain growth for a prolonged period of time–at least two years. I’ve done well with this, over the years, despite the fact that it blew up in my face back in 2000.

So lets ask ourselves about upside. If you had $100 to invest, and could choose Google, Microsoft or Sun, which would offer the most upside? Apple looks great now, but its not so long ago people were writing it off. Investors though, since January 2004, would have done far better with an investment in Apple, than Microsoft. Its about upside. In other words now is probably not the best time to invest in Apple. You want to invest when the stock is low, right, in order to achieve the best returns.

So if Sun’s stock is undervalued, what might be an initial trigger for a boost? A net-based community behaviour or a new product launch or parnership announcement, or a combination of both? Last week we saw the Google announcement give Sun’s stock a quick boost, even though some in the industry slammed the news as just hot air. For nuance check out tecosystems.

I don’t know exactly what the deal means, but while I am on the Google Sun (sounds a bit like Googlezon doesn’t it?) subject I will throw in one possible curve ball. Why not Sunray as a front end for Google TV? Sun already has a ton of experience with huge scale media streaming after working so closely with MLB.com. Google isn’t likely to go with Apple or Microsoft as a universal front end, but if not them then who? The network is the television. But enough of speculation within speculation.

One of the reasons I made this post is it seems like professional investors are somewhat blind to improvements in Sun’s business, if you check out the pronouncements of many Wall Street firms over the last two years. Sun is surely better positioned that it was three years ago. Here are a couple of examples:

Recent wins at GE (450k users) and GM are good indicators of increasing enterprise acceptance of Sun’s software story.

New revenue streams from SeeBeyond and Storagetek should kick in over the next couple of quarters.

Sun’s Galaxy servers are a function of design, rather than price. Sun’s AMD story is hot and Opteron is surely all upside.

So will “amateurs” really begin to change the investment game? Who is having a naked conversation?

I agree with Shel that Sun is currently undervalued, if you compare improvements in terms of core assets, with outside perceptions of those assets. Of course Shel won’t change the share price himself, but you never know which butterfly wing creates a hurricane on the other side of the world…

As I write this post it strikes me that there must be bloggers out there who are already making share prices move. I just don’t know who they are. Do you know of any? Apparently there is no clear correlation, for example, between Jeff Jarvis’ Dell Hell and Dell’s share price. But what about positive picks?

Talking of stock pickers, if Henry Blodget and Mary Meeker are back, then why not Sun?

In the immortal words of John Meynard Keynes, a real economist rather than a partisan hack:

“When the facts change I change my mind. What do you do, sir?”

[As a disclaimer I should declare that I am not a professional investor or stock advisor. Also, RedMonk employees are not allowed to invest in tech companies that we cover. However I should also state Sun is a RedMonk client.]

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4 Responses

  1. James,

    In the few short days since I made my forecast (and investment) Sun stock has dropped from $4.25 to $4.12. If this is a trend, people should follow where I invest, then short whatever I buy.

  2. come on shel. you just missed the google aura short term boost. i wasnt’ talking to day trading, but value/perception investing.

    lets see some fruits of the google/sun partnership before we write it off entirely.

    give it 12 months. you were trying to get in early. and you did.

    it could be far worse. when Stephen O’Grady and me set up RedMonk he had shares in both Oracle and Sun. he had to dump them, and took a bath on both.

    seriously though its interesting the street has done such a great job of recalibrating as a gatekeeper considering how disastrous its advice was for so many investors in the bubble.

  3. Since you’ve quoted Henry Bodget, it might be worth looking at his take on the ability of outsiders to pick stocks. This is a very dangerous game, espeically in this market. We’ve seen it before and it will come ot an end. The question is – crash or soft landing? That’s what stock pickers are worried about.

  4. A few URL’s. Vacuous links, but interesting. ACM Queue had a set of articles on CMP.

    Luiz André Barroso (ex DEC, now Google) worked on an 8 way CMP research project and talks about power scaling benefits. The other articles are SMCC engineers talking about Niagara.

    My expectation is that Google are going to buy a shedload of Niagara boxes from Sun. That is likely to be the real background.

    http://acmqueue.com/modules.php?name=Content&pa=printer_friendly&pid=330&page=1
    http://acmqueue.com/modules.php?name=Content&pa=showpage&pid=328
    http://research.compaq.com/wrl/projects/Database/isca00.pdf

    Neil CorlettOctober 17, 2005 @ 12:11 pmReply



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