Only five years ago, Sun Microsystems Scott McNealey told BusinessWeek,
"....two years ago we were selling at 10 times revenues when we were at $64. At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes. What were you thinking?"
SUNW now trades at 1.2 sales, down 91% from McNealy's very pertinent thoughts. Although SUNW is not a semiconductor stock, McNealy's points remain valid for any issue, tech, internet, semi, any issue at all.
Thursday, November 17, 2005
Simple Common Sense
Good paragraph from this market analysis post: