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Thursday, April 28, 2005

Sun Micro/ArcaEx deal and NYSE accretion

In early February, Sun Microsystems inked a deal with Arca. This deal created the world's first platform to buy and sell blocks of computing power at market prices. The Financial Times said the new exchange would be operational in three to five months from the time the aforementioned article was published. That means by August, this futuristic, high-margin line of business should be chugging along. The Financial Times also reported that a speculative market for computing power futures likely would emerge once the exchange was established.

There really wasn't much buzz about it, but as the article in the link above states, some analysts see the market for auctioning computer power exceeding $4 billion. The dinosaurs who rule the NYSE have no clue what this market is about, but won't need to with this merger. This type of intrinsic value that NYSE shareholders get out of this deal will only baffle folks like the non-sophisticated, Langone team.

The earnings that this deal with Sun produce will be accretive to the earnings of the NYSE. It also gives NYSE shareholders entry into a new, high-margin, growing market.

Shades of Yahoo and Google

In some ways the AX/NYSE v NDAQ/INGP duopoly is similar to the YHOO v GOOG duopoloy. YHOO has numerous streams of revenue while GOOG has only one. AX/NYSE has numerous streams of revenue with this merger (i.e., computing power, traditional exchange revenue, options, and other derivitiaves). NDAQ/INGP has one revenue stream (it's multiple streams, but one category -- "traditional exchange revenue.").

1 Comments:

Anonymous Anonymous said...

no one interested in any thing sunw does.They shoud take notice

11:54 PM  

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