This article couldn't be more positive. Orders up 22%. Yee Haw.
Thursday October 15 8:25 PM EDT
Sun Microsystems Posts Higher Q1 Profits, Strong Orders
By Therese Poletti
SAN FRANCISCO (Reuters) - Sun Microsystems Inc. (SUNW - news) Thursday reported higher profits for its first fiscal quarter that surpassed Wall Street
expectations, with strong sales of workstations, computer servers and services.
The Palo Alto, Calif.-based computer maker said net income rose to $198 million, or 50 cents a share, on revenues of $2.5 billion, versus $163.2 million, or
41 cents, and revenues of $2.1 billion a year earlier, excluding some one-time charges.
The results were slightly above Wall Street consensus estimate of 49 cents a share, according to First Call, which tracks analysts' estimates.
But analysts said they were most impressed by Sun's order growth rate of 22 percent, which far surpassed expectations ranging from 12-15 percent growth,
especially in the current economic environment, where other computer makers are seeing either negative or single-digit growth rates.
''The quarter was spectacular,'' said Jay Stevens, an analyst at Buckingham Research. ''The story is very simple, their strategy is working. One set of
platforms, competitive pricing, and they are winning share...Other companies wish they could say that order growth is 22 percent.''
In the quarter, Sun wrote down a charge of $80 million for in-process research and development, related to its acquisition this summer of Net Dynamics Inc., a
company that develops application server software.
Sun also incurred a one-time increase of $30.4 million to its income tax provision. Including both of these items, Sun reported net income of $113.9 million, or
29 cents a share, in its first quarter ended Sept. 27, from $108.4 million, or 27 cents, in the corresponding period a year earlier.
''We are very pleased with our overall results, especially in the current economic environment,'' Michael Lehman, Sun's chief financial officer told analysts on
a conference call.
Lehman said that the company's revenues were negatively impacted by two to three percent from currency fluctuations.
Sun executives said that the quarter included some $300 million in orders that were placed by its distributors, ahead of the company's anticipated system
changeover, which Lehman frequently cautioned analysts about. Even excluding the backlog of orders, Sun's orders were up 22 percent year-over-year.
''Excluding some orders related to the system transition, we experienced strong orders,'' Lehman said.
Sun is switching to a new software in its computer systems business during its second fiscal quarter. Sun cautioned analysts that the company faces some
challenges in the quarter, due to the system changeover and not to raise their estimates.
''All I am saying is they have to be realistic about the ability of a company to turn on a new system,'' Lehman said in an interview, adding that he wanted to
caution analysts not to expect ''a massive upside'' to their previous thinking and rush to raise estimates, after the strong orders in the quarter.
Sun executives said that even though the economic environment is difficult, especially in Japan, they are still seeing strong demand for their products. The
quarter was strong across the board in all products, from low-cost workstations to high-end servers, and services and software.
Services showed one of its biggest surges in growth, up 34 percent to $335 million in the first quarter.
''We are seeing opportunities and good demand,'' said Ed Zander, Sun's chief operating officer, on the conference call. ''We have an incredible story and a
new vision of computing, companies want to talk to us right now. We are feeling very good about our prospects.''
Sun executives said they plan a press conference in New York on Oct. 27 to roll out the company's next generation of its Solaris operating system for 64-bit
computing, an operating system they said is a generation ahead of Microsoft Corp. (MSFT - news)'s yet-to-be released Windows NT 5.0. |
