How low can we go?

SUNW has gone from a high of over $60 per share just a few months ago  to now less than $20 per share as of the most recent closing I've seen; I'm in Bangkok as I write this and having been on the road for over a week this time, I kind of lose track of things just a bit.  But I do believe we're under $20 at this moment.  How low can we go?  SUNW reflects the NASDAQ as well as it does the recent malaise of the U.S. economy.  We've issued our profit warnings, bemoaning the U.S. slowdown, assuring investors we're cutting costs.  And we are.  Believe me, we are.  This evangelist is flying coach these days, despite the fact that I've earned the right to fly business class four years in a row now, based on Sun policy on such matters.  But these are tough times.  I'm lucky to be flying at all.

So what happened?  Irrational exuberance?  Yeah, maybe....but now we seem to be witnessing the opposite:  irrational pessimism.  In a few short months we've gone from New Economy Wonderkind to Tulip Bulb Chump, despite the fact that not only are Sun's profits still growing, but growing well.  Okay, it's not a 60% annual rate, but 18% isn't bad compared to the vast majority of large firms on this fair globe...especially during a slowdown.  We have emerged as the largest server supplier on the planet, we have a good amount of cash, and our platform leads the day if software developer momentum and loyalty is any measure.  Still, the market has punished SUNW without remorse.  That that doesn't kill us makes us stronger.  Sun will rise again -- the company is too well positioned to fail.

Sun Microsystems is the poster child of the Network Age.  The fortunes of Sun are a measure of the health of the transition - we're between ages folks, seeing the end of one (the Industrial) and the beginning of another (the Network).  Transitions are not without hiccups, it seems.  I suppose it's always been so.  Five hundred years ago we left the Dark Ages and headed for the Enlightenment with the advent of the printing press.  If I were more of a history buff, maybe I'd be able to cite similar hiccups during that transition -- early book burnings perhaps; is fear of change an evolutionary artifact of h. sapiens sapiens?  Maybe so.

The fact of the matter is, effective competition in our system requires productivity increases.  It's the putative assumption we all must make.  We must keep doing better, doing more with less, or we will invariably fall victim to Darwinian forces inherent in the competitive economic landscape.  Therefore, we must keep innovating in order to compete.  Just like Nature keeps innovating with life forms.  But we cannot innovate so fast as to side-step the granularity of the selection processes -- which is to say innovation must be reasonably paced else the entire system will fall apart.  At least that's what Stuart Kauffman posits in his most recent work Investigations.  There is a natural "governor" that slows the engine of innovation such as to ensure the health of the aggregate system within which all parties play.  So we must innovate, but not too quickly.

Perhaps our recent hiccup, then, is a natural function of the governing forces inherent in a healthy system.  To that end, we should view the recent economic qualm in the U.S. as healthy, natural and needed.  And as it is with all, this too shall pass. I have faith.  And I believe Sun will rise again...at least that's how it looks from Bangkok today.