Thought some of the #'s in this news blurb were interesting:
Sun Microsystems Net Soars 41% As Margins Rise
Dow Jones News Service ~ January 15, 1997 ~ 8:45 pm EST
By Joan Indiana Rigdon
Staff Reporter of The Wall Street Journal
Sun Microsystems Inc.'s fiscal-second-quarter earnings surged 41%, another sign
that Sun is using growth at the top of its product line to offset serious threats from
Intel Corp. and Microsoft Corp. at the low end of the line.
The Mountain View, Calif., maker of workstation and server computers posted net
income of $178.3 million, or 46 cents a share, compared with the 42 cents that
analysts had expected, according to First Call. A year earlier, net was $126 million,
or 32 cents a share. Revenue in the quarter ended Dec. 29 surged 19% to $2.08
billion from $1.75 billion a year earlier.
Sun said growth was strong across its product line. The company's margins
increased, too. As a percentage of revenues, Sun's gross margins were 50.4% in
the quarter, up from 44.5% a year earlier and 47.7% in the fiscal first quarter.
Sun's results were released after the market closed yesterday, and failed to rally its
shares in after-hours trading. Sun traded after hours at $28.25, the same as its
closing price earlier on the Nasdaq Stock Market, where it fell 62.5 cents.
"We had a really strong quarter in all of our businesses," said Sun's chief financial
officer, Michael Lehman. He declined to elaborate on how individual product lines
performed.
Mr. Lehman also declined to say whether Sun's highly touted Internet programming
language, Java, has added to Sun's earnings. Sun has consistently refused to break
out Java performance. But Mr. Lehman said Java has considerable "calling-card
ability," meaning that because of the intense popularity of the technology, Sun sales
people have an easier time approaching customers.
Sun is getting most of its growth from its high-performance servers and
workstations, which have rocketed in recent quarters largely on the popularity of
Sun's new UltraSparc chip and improvements in Sun's Solaris operating system.
Meanwhile, the low end of Sun's business, entry-level workstations, have suffered
from growing competition from Intel's super-powerful Pentium Pro chip.
Rather than focus on the fight for the low end of the business, which offers
single-digit margins for entry-level workstations, Sun has concentrated on the upper
end, where server margins run 40% and higher. "From a business point of view, Sun
is not giving up. But they're working around [Intel and Microsoft] quite nicely,"
according to Dataquest Inc.'s Peter ffoulkes.
Sun's decision to focus on the high end is key to its success, said David Wu, an
analyst at ABN.AMRO Chicago Corp. To grow in the technology market, "you've
got to run away from Bill Gates and Andy Grove as fast as you can," he said,
referring to the leaders of Microsoft and Intel, respectively.
Indeed, though Sun remains No. 1 in the workstation market, its low-end
workstation line has been taking a beating. In the calendar third quarter, Sun
shipped only 68,993 workstations, down 22.4% from second-quarter shipments of
88,908, according to Dataquest. Last week, Sun upgraded and repriced its
low-end workstation computers to perk up that end of the business.
Meanwhile, Sun's server business has taken off, as many buyers find the
combination of Sun's most powerful UltraSparc chips and its Solaris operating
system to be more dependable for heavy computing tasks than the newer and
cheaper servers that run on Intel chips and Microsoft's new Windows NT operating
system. Sun shipped 3,438 server computers in the calendar third quarter, up 22%
from previous-quarter shipments of 2,822, Dataquest said. Second-quarter
shipments were up 43% from the first-quarter shipments of 1,971 server
computers.
(END) DOW JONES NEWS 01-15-97
8 46 PM |
