Sun skims past Street estimates

Sun Microsystems edged a penny ahead of lowered analyst expectations Thursday, reporting pro forma net income of $263 million, or 8 cents a share, on revenue of $4.1 billion.

Sun Microsystems edged a penny ahead of lowered analyst expectations Thursday, reporting pro forma net income of $263 million, or 8 cents a share, on revenue of $4.1 billion.

Analysts surveyed by First Call expected Sun to report net income of 7 cents per share for the fiscal third quarter, which ended March 31. Compared with the year-ago quarter, Sun's revenue grew 2 percent from $4 billion, while pro forma earnings per share decreased 43 percent from 14 cents.

Sun lowered expectations in February. Analysts had expected net income of 15 cents per share, but Sun said it would earn 7 cents to 9 cents per share.

YES

Sun Chief Executive Scott McNealy touted Sun's continued revenue growth despite the company's strong performance a year ago and the economic slowdown that has hammered Hewlett-Packard and other competitors.

Chief Financial Officer Mike Lehman, though, said spending appears to be slowing down somewhat outside the United States.

"Our results reflected the sharp decline in capital spending in the information technology sector, principally in the United States, although we did see some moderation of demand in Europe and Asia-Pacific," he said in a statement.

Actual income at the company--including items such as one-time charges or gains and losses on investments--was $136 million, or 4 cents a share, compared with $509 million, or 15 cents a share, a year ago.

Sun is at a critical juncture in its history, introducing its most important new servers during a major slowdown in technology spending. The Palo Alto, Calif., company profited mightily the last few years from selling servers to start-ups and established companies building Internet operations, leaping ahead of IBM and HP.

But now the company must adapt its aggressive sales force and high-growth mentality to direr times.

Sanford C. Bernstein analyst Toni Sacconaghi expects a more "sheepish" attitude from Sun. U.S. revenue for the most recent quarter will shrink 10 percent, he predicted, while he expects Sun's worldwide revenue to shrink for the current quarter.

Hampering the transition to Sun's latest products based on the new UltraSparc III CPU have been glitches that weakened the performance of the new chip and difficulties moving from 750MHz speeds to 900MHz.

At the same time that IBM and HP have stepped up their competitive pressure on Sun, the company faces a new North American threat in Fujitsu Technology Solutions, which is selling high-end servers with the same operating system and CPUs similar to Sun's. Though Fujitsu earlier planned to begin selling a gigantic 128-processor server in April, a spokesman said the launch date has been pushed back to May.

Newsletters

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
See All
See All