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Savings Experiment: Snow Removal
Sun Microsystems (NASDAQ: JAVA) followed the announcement of its ticker symbol change with a plan for a 1-for-4 reverse stock split [subscription required]. That would put the stock in the $20 range at current prices.
It won't matter. Sun's shares are off about 10% over the last six months while larger rivals Hewlett-Packard (NASDAQ: HPQ) and IBM (NYSE: IBM) are up more than 20%.
Management at Sun believes that a low stock price, under $10, makes it appear as if the company was still "struggling to overcome its post-dot-com era slump." Perhaps a higher stock price could change that perception in the eyes of investors. As management said to The Wall Street Journal, competitors pointed to Sun's stock price to sway "naive customers who might not be able to look beneath the surface.''
Sun is underestimating the intelligence of enterprise server buyers. They do not buy Sun products not because of its stock price but because they can get a broader product range from companies like HP. Sun has had no success in getting robust demand for its products. In the last quarter, revenue was flat with the same quarter a year ago with only cost cuts improving the bottom line.
Sun has tried almost everything now from share buy-backs to ticker changes.
The company's problem is that it has no evidence of a real recovery to point to.
Douglas A. McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
9-06-2007 @ 10:13AM
kluji said...
In my 30 years of market experience i have found that reverse stock splits NEVER work out for the investors and are a sign of bad things to come! Its basicly a facade. Just my humble opinion.
9-11-2007 @ 1:59PM
Joan Nalband said...
Scott McNealy should have spent less time dogging Microsoft and paid attention to the store instead of appearing at Senate hearings. Sun has lost the "MO", could be shades of Gateway.
9-16-2007 @ 10:20AM
Sunshine said...
Wow the angry shorts!
May as well compare this company to Apple because none of you have a clue, most dont. Even products from real computer companies like Dell and HP are chump change compared to Sun's products. IBM (the only enterprise worthy company mentioned) has just inked a deal with Sun for obvious reasons. As for the Gateway comment...wow! someone really has their head in the clouds...hopefully you mentioned Gateway because Sun is steal right now and potential buyout material...other then that you clearly have no clue.
It is apparent only 'techies' invest in Sun and are capable of seeing the value. Its obvious Sun realizes this and is now making some changes to appeal to the dummy.
The Sun is going to shine. Can you say IPTV...? I can. I am a Sun fan and stockholder.
10-18-2007 @ 11:37AM
99-Sam said...
It's about time Sun Micro executives focus on improving the stock performance. But I say to the shareholders, make sure you test the water first before you vote 'yes' to the split stock. Do your homework first....how the market will re-act on the split stock?