Sun Micro’s Loss Narrows as Revenue Rises in Quarter
Sun Microsystems Inc. said Thursday that it narrowed its fiscal first-quarter loss and offered evidence that it finally may be pulling out of a years-long slump.
The computer and software maker lost $174 million, or 5 cents a share, in the three months that ended Sept. 26, compared with a loss of $286 million, or 9 cents, in the same period a year before. Revenue increased year-to-year for the second quarter in a row, gaining 4% to $2.6 billion.
Having reported losses for most of the last three years, Sun said it was encouraged by the performance of new lower-cost computers it’s using to fight off IBM Corp. and Hewlett-Packard Co.
Sun Chief Executive Scott McNealy said the company had maintained its investment in research and development “against the advice of a lot of folks....That’s starting to pay off.”
Without one-time charges, mostly for a legal settlement and previously announced restructuring costs, Sun would have eked out a profit of $13 million, or break-even on a per share basis. That bested the Wall Street consensus prediction of a 3-cent loss.
Sun shares rose 13 cents to $4.10 in late trading after the announcement, having fallen 5 cents to $3.97 on Nasdaq earlier in the day.
Caris & Co. analyst Mark Stahlman said Sun’s cost-cutting efforts have helped the company turn the corner toward steady profitability.
“It’s recognized by the people who have been close observers that this has happened, but Wall Street is very busy and has other things to think about,” Stahlman said. “I think Wall Street is finally going to notice.”
The company made no bottom-line projections for the quarter that will end in December, but McNealy said Sun would ship the newest version of the company’s flagship operating system for server computers and workstations, Solaris 10, in November. Sun says that software will easily run programs designed for the free Linux system.
“Solaris 10 is a huge product step for the company,” Stahlman said. “December is shaping up to be a strong quarter, and quite possibly a highly profitable quarter as well.”
One of the companies hardest hit by the popularity of Linux, Sun has retooled by allowing customers to mix and match Solaris or Linux operating systems with computers powered by Sun’s UltraSparc chips or less expensive alternatives from Intel Corp. and Advanced Micro Devices Inc.
At the same time, Santa Clara, Calif.-based Sun has been pushing new business models, for example renting out desktop software to big companies for $100 per employee a year.
The number of computers covered by that program rose 14% in the latest quarter from the previous three months, to more than 450,000.
Such initiatives are still too young to be clear winners, analysts said. But Stahlman said Sun was trying so many new things that it was now much more likely to get invited to bid for major technology accounts.
“I think that has been the goal, and it is working,” he said. “The total outstanding sales opportunities have continued to grow substantially.”
