Wall Street thinks Merced is delay is good news for Sun Microsystems Inc too (CI No 3,425). Morgan Stanley is raising its rating to strong buy from outperform and believes there is likely to be a general resurgence in the Unix server market. Customers do not just buy boxes, they buy roadmaps. By weakening the high-end of the Wintel roadmap, we think that fewer customers will choose mid-range Wintel servers and Sun will not have to be as aggressive on pricing as we modeled. By the time Merced ships Sun will have been shipping full 64-bit systems for two years. The extra Sparc development time Sun gets – if UltraSparc III does not slip more than the one quarter it already has – will eliminate much of the advantage that Hewlett-Packard might have had over Sun. The brokerage also believes HP may benefit from the delay because it means HP has more opportunity to sell its higher-margin Unix servers. We’re still waiting for Sun to make hay at Intel’s expense. Meantime the delay, it says, also gives IBM another year to leverage its bet on its own processor technology and, in particular, copper.
