Sun Microsystems Reports Record
Revenues and Earnings for 3rd Quarter
By LAWRENCE M. FISHER
AN FRANCISCO -- Sun Microsystems Inc. reported Thursday
record revenues and earnings for its fiscal third quarter, as the
maker of workstations and servers continued to gain market share. While
Sun's earnings were just a penny above the consensus estimate, revenues
were substantially higher than analysts' expectations.
Shares of Sun, which reported its results after the market's close, ended
the day at $60.4375, down $2.125 in Nasdaq trading, amid a day of
turmoil for technology stocks.
Sun's strong results, coming just a day after Apple Computer Inc. beat
estimates for the sixth consecutive quarter, indicate a shift in the market.
Sun and Apple have long been considered vulnerable because they do
not adhere to the standards set by the Microsoft Corp.'s Windows
operating system and the Intel Corp.'s Pentium microprocessors. But it
now appears that both companies are finding ways to differentiate their
products and generate above-average revenue growth and profit margins
while "Wintel" stalwarts like the Compaq Computer Corp. sputter.
"Whereas a year ago, both the investor and the end user opinion was that
being out of the mainstream was a bad thing, now being out of the
mainstream is a good thing," said Laura Conigliaro, an analyst with
Goldman Sachs. "One way it's a good thing is that it provides clarity of
focus. Another is value-added."
For the quarter ended March 31, Sun reported earnings of $261.2
million, or 63 cents per diluted share, up 13 percent compared with
$232.0 million, or 59 cents a share, in the comparable period a year ago.
Revenues rose 24 percent to $2.94 billion from $2.36 billion in the third
quarter of fiscal 1998.
Earnings for the quarter include a charge of $28.7 million in connection
with the acquisition of the Maxstrat Corp.. Due to the structure of this
transaction, Sun also incurred an increase of $10.9 million to its income
tax provision. Without these one-time items, Sun earned $291.4 million,
or 71 cents a share. Per-share figures do not reflect Sun's recent
two-for-one stock split which was paid on April 8.
Analysts expected Sun to earn 70 cents a share, according to First Call.
"We experienced particularly strong demand for workgroup servers,
high-end servers, storage and services," Michael E. Lehman, Sun's vice
president of corporate resources and chief financial officer, said in a
telephone interview.
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