Valuation, Execution-Style

Execution and growth are the themes that have investors panting now.
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If you want to know the extremes of valuation facing this market, examine the dichotomy of Silicon Graphics (SGI) vs. Sun Micro (SUNW) - Get Report.

First, people are paying an unprecedented multiple for Sun Micro: 40 times this year's earnings. In previous years I used to sell Sun any time it got to a market multiple. Sometimes, I would let it lift a little more than that. But Sun in the end is a hardware company and I have always been loathe to pay up huge for hardware. No matter, Sun is "hot," the big guys love it and it's got mo'. The Net uses Sun and Sun is the dot in the dot.com, or so the ad says.

Silly Graphics, on the other hand, has no mo'. So what is the market willing to pay for it, P/E-wise? Nothing. That's right, after you subtract out the SGI cash and the

MIPS Technology

(MIPS)

stake, you get zero. Silly Graphics is trading for free. One of the great growth companies of the decade is selling for nil times earnings. (And it is the multiplier, not the multiplicand that causes it to be zero, although the multiplicand has certainly been doing its share, with these losses.)

How can you explain the disparity? This market loves not only raw, organic growth, but it adores execution. Sun Micro right now is the best executing hardware company, save perhaps

EMC

(EMC)

. Silly Graphics is the worst executing hardware company, including

Sequent Computer Systems

(SQNT)

and

Hewlett-Packard

(HWP)

(that's saying something!).

Execution. High growth. These same themes keep appearing. You may disagree with them, but I am sitting here cursing my sale of Sun Micro at $133 this morning and I will short this Silly Graphics the moment it gets back to $16, where it was before it preannounced.

Fact, Jack.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long EMC, although positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

letters@thestreet.com.