Sun's Coulda Woulda Shoulda
Sun Microsystems (SUNW) trades at $5 ... Google (GOOG) a hundred times more at $518. — Stock prices mean nothing on their own, of course. Google's market cap at $159 billion is not a hundred times greater than Sun's at $18 billion.
Context & Ripple Effects
Two years after Business Week asked where the money really was in Googling For Gold, the question has hardened into a balance-sheet fact: Google's $159 billion market cap runs nearly nine times Sun Microsystems' $18 billion, even though their share prices ($518 versus $5) make the gap look a hundred times wider. Forbes' point is that per-share prices flatter nobody — the market is pricing two different businesses, not one stock's optics.
Sun's own moves explain part of the discount and part of its bet: CEO Jonathan Schwartz has just announced Apple will adopt ZFS as the file system in Mac OS 10.5 Leopard, extending Sun's playbook of seeding its technology into other vendors' products rather than monetizing it directly.
First-order effects
- Sun shareholders hold an $18 billion company whose recovery case rests on Schwartz's give-the-software-away strategy (ZFS into Leopard being the latest instance) lifting demand for paid hardware and services.
- Google's $159 billion cap means any incremental investor dollar comparing the two names is choosing an advertising-scale platform over an enterprise systems vendor.
Second-order effects
- If ZFS adoption in Leopard validates the open-source-as-distribution model, rival server and storage vendors face pressure to open their own crown-jewel technologies to stay relevant in buyers' roadmaps.
- A persistent nine-to-one valuation gap pushes Sun toward sharper cost discipline or strategic repositioning, because public-market patience for subscale hardware margins does not last indefinitely.
Third-order effects
- Markets are structurally repricing the industry around ad-funded platform economics, leaving mid-tier infrastructure vendors valued as consolidating commodity suppliers unless they convert technology reach into recurring revenue.
The trend: Valuations are decoupling ad-platform giants from enterprise hardware vendors, forcing the latter to trade proprietary control for distribution through open sourcing.