Watch SUNW, here’s why

On October 4, Sun Micro and
announced a strategic
whereby both companies would cross-promote and distribute
their respective technologies.

“As part of the agreement, Sun will include the Google
Toolbar as an option in downloads of the Java Runtime Environment from,
Sun’s showcase and portal for Java technology enthusiasts and developers.”

In general, it seems safe to say Google is not in the habit of doing deals that
are better for somebody else than for it.

It seems like any accelerated adoption of Sun
Microsystems’ star-office software would have to be good for Sun. But how much
any extra software sales can overcome flat-to-down hardware sales is not clear.
(How much of Sun’s business does Star-office represent? Without checking, I’m
guessing 5%? Or less…)

In my few dealings with Google, they are much too proud of
their low-cost, Linux, no-brand, custom-racked, roll-your-own server clusters to
start buying branded Sun hardware. (Sun’s AMD x86 option removes this idea from
impossible to only “very unlikely”.)

If Sun does “fix” the price issue for Google, can it still
make a profit? (I doubt it!) Maybe give them the hardware at cost in exchange
for an endorsement and couple-Ku free seats of software (for Google’s
employees)? (This is about how Juniper used to run. In 1999 – 2000, Juniper
refused to use Microsoft wherever possible.)

Bottom line: The Google deal might be good for Sun’s
software, and drive incremental sales growth. But I doubt it can significantly
drive Sun’s top-line, or even its net.

Even though SUNW had an attack of six month highs, it
continues to get slapped back by its upper channel — resistance at the $4.5ish
area. Losers continue to dominate the stock and no feelings of “fear of missing”
the next move are showing up. If it settles down in this range and achieves a
closing basis over $4.5 (with a daily trading range starting at $4.25 and ending
at $4.5) then it will paint a different story. A bullish story! That will show
buyers have been pulled to the edge of their trading seats and will reach for
the stock. That’s what I call “fear of missing”.

Melanie Hollands