Sun Microsystems: All Sizzle, No Steak

September 5, 2007 by Douglas A. McIntyre

Last week, Sun Microsystems (JAVA) changed its ticker symbol from SUNW to JAVA.

JAVA is a widely known and highly regarded programming language that Sun introduced twelve years ago. It is used on most PCs and many portable devices. But, Sun would be hard pressed to show that it made much money on the initiative.

Now, Sun is going to reverse split its stock 1-for-4. The reason the company gave according to The Wall Street Journal was "that having Sun’s stock below $10– where it has been mired since 2002 — created an inaccurate perception that the Santa Clara, Calif.-based server and software maker was still struggling to overcome its post-dot-com era slump."

Somehow Sun believes that the new ticker and higher stock price will take away customer objections to doing business with the company..

That one is hard to see.

The reason that customers do not do business with Sun is that it competes with much larger companies like HP (HPQ) and IBM (IBM) that offer a wider array of products and services. Sun showed virtually no revenue growth in the last quarter, but perhaps the new ticker will fix that.

Over the last six months, Sun’s share price is down a little under 10%. IBM and HP are both up nearly 30% during the same period.

It seems hard to imagine that the reverse split will solve that.

Douglas A. McIntyre

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