Things are definitely improving at Sun.I think they are on the right path. The key metric for me is the consistent revenue growth over the past three quarters.
Rising sales help Sun Micro narrow loss
By Rex Crum, MarketWatch
Last Update: 5:48 PM ET Oct 26, 2006
SAN FRANCISCO (MarketWatch) -- Sun Microsystems Inc. said Thursday that its loss narrowed by 55% last quarter as revenue continued to improve for the computer server and software maker amid its latest attempts at restructuring and regaining its position among the elite of the business-computing industry.
Santa Clara, Calif.-based Sun lost $56 million, or 2 cents a share in its fiscal first quarter, compared to a loss of $123 million, or 4 cents a share in the same quarter last year. Revenue grew to $3.19 billion from $2.73 billion last year. Gross margins were 43.5%, down from 44.1% a year ago.
Excluding restructuring charges and other one-time items, Sun said it would have lost a penny a share. By that measure, the company beat the estimates of analysts surveyed by Thomson First Call, who forecast the computer server and software maker to lose 4 cents a share on revenue of $3.2 billion.
While Sun's stock remained relatively unchanged in after-hours trading, moves by Chief Executive Jonathan Schwartz to restructure the company have put it back in favor with Wall Street and investors to a degree. Sun's shares, while far from their all-time highs, have risen almost 23% this year, and tacked on 6 cents to close Thursday at $5.36.
"We're continuing to see the market segment into those who see IT [information-technology] as a competitive weapon, who invest in network infrastructure to grow value and opportunity, and those who see it as a cost center to be eliminated over time," Schwartz said on a conference call to discus the company's results.
Chief Financial Officer Michael Lehman added that Sun has cut about 2,000 jobs since June, and will cut between 1,000 and 2,000 more positions by the end the its fiscal year. The job-cuts are part of a restructuring plan that Schwartz announced in May, shortly after he took over at CEO from Scott McNealy.
Sun is also in the process of selling or getting out of leases at several facilities in the Silicon Valley region.
Sun officials said revenue grew due to acquisitions such as it purchases of StorageTek and SeeBeyond, and improving sales across its various business lines. Sales of hardware products accounted for 61% of Sun's revenue, while services deals made up 39% of the company's quarterly sales.
Speaking on a conference call, Sun's Chief Executive Officer Jonathan Schwartz said the company's hardware-systems sales rose 15% from a year ago, while storage-technology revenue climbed 14% and was led by sales of Sun's midrange StorEdge 5000 disc product and its high-end Sun StorageTek 6000 tape-storage device.
Sun didn't give an exact forecast for its second fiscal quarter, but Chief Financial Officer Michael Lehman said the company expects to increase revenue in the high single-digit range, which gross margins between 42% and 44%.
Analysts estimate the company will break even on a per-share basis on revenue of $3.53 billion.
End of Story
Rex Crum is a reporter for MarketWatch in San Francisco.
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