Is the Sun Shining for Sun Microsystems?

Dennis Biray

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If you invested in the technology sector during the late 1990s, you probably became very encouraged from the amazing capital gains you earned during this time period. Sun Microsystems (SUNW) is no exclusion this system, reaching record highs in of 80.00 in 2001. However, like most of the rest of the technology sector, Sun experienced losses hurting every investor still stuck with the overbought equity. However, five years later as the dust has settled, does Sun pose itself to be a reasonable investment?

Economically speaking, technology stocks have increased during periods of inflation and have fallen during periods of recession. As inflation have been rising the past few years as represented with the continued increase in interest rates, you would have expected a gallant corporation in Sun to increase back to its glory days right? While such a sentiment is usually an excellent one, Sun has failed to provide investors with any comfort. Through the past three years, Sun has experienced no growth whatsoever despite indications of head and shoulders technical situations. Supporting a resistance level of 5.25 and a supporting level of 3.50, a timely speculator is able to make good short term investments, but long term investors are not able to help their fixed-income desires. What makes matters worse for investors looking at Sun is the potentially hard landing recession in store for the US economy. During such a period with the decrease in employment and domestic income, consumers have less money to purchase luxury goods such as Sun’s software products, and as a result revenue for the corporation will go down.

When such happens to a company, a decrease in quantity demanded for elastic goods will hurt the profits which have already been hampered for Sun. With an unusual decrease in margins in terms of revenue and profit over the last three years sustaining poor operating margins, there is little optimism in terms of future growth for this company. If you do own this company, I would suggest selling immediately, as I really doubt Sun will reach 5.00 again for the next few years. While the company is respectable and well known as a large capitalization equity, like Microsoft and other companies, Sun looks like it has lost its original steam and will be more of a nuisance to investors rather than capital gainer.

Dennis Biray presents advice on all kinds of topics ranging from finance and investing to fitness to sports. For more information email him at , or to view other articles written by him visit


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