Sun able to 'weather' downturn

update Company's net cash-revenue ratio of US$1.8 billion is "healthy", compared to negative cash positions of its main competitors, says APAC president.
Written by Sol E. Solomon, Contributor

update SINGAPORE--Sun Microsystems is well-placed to weather the current economic downturn, says a senior company exec here, even as the company's plans to shed its workforce by some 14 percent.

According to Sun Asia-Pacific President Lionel Lim, the current global financial crisis resulted from a breakdown of credit markets that led to a severe cash-liquidity crisis.

"Corporates with liquid cash assets are better placed to weather this storm, in the midst of many large and small companies [that are] finding it extremely challenging to raise cash to keep their businesses going," Lim said in an e-mail interview with ZDNet Asia.

In this aspect, he noted that Sun is in a good position as the company's net cash--as a percentage of its total revenue--is significantly higher than that of its main competitors.

"Our net cash to revenue ratio of 13 percent as of Dec. 31, 2008, is very strong and healthy, compared to the negative net cash position of many other large competitors," he said, adding that Sun's net cash for the period was US$1.8 billion.

The company's positive outlook comes in spite of its recent announcement that it slashed 1,300 jobs, or some 14 percent of its workforce.

Lim explained that the layoffs are part of a series of changes designed to "align its cost model with the global economy". He added that there is "no information as yet" on how the cuts will impact its headcount in the Asia-Pacific region.

"But, [we will] continue to review the business to balance our workforce and ensure resources are aligned to meet business objectives and market demands," he said.

During a briefing attended by analysts and reporters here Monday, Lim said big systems were the only loss-making business for Sun during the year.

"With global economic pressures continuing to weigh on customers' purchasing decisions across all geographies, many decisions relating to higher-end system purchases were pushed out, causing overall billings for Sparc enterprise servers to be down year-over-year," he told ZDNet Asia.

However, growth continued in Sun's key product categories encompassing software, open storage, chip multi-threading (CMT) and x86 systems, which delivered year-over-year double-digit growth rates.

Lim added that, year-on-year, the company's Java-based business grew 47 percent to US$67 million, and its MySQL database climbed 55 percent to US$81 million. ZFS file systems also rose 21 percent to US$31 million, while CMT-based servers enjoyed a rise of 31 percent to US$369 million.

"We've made strategic technology bets over the last several years that are paying off by way of CMT, open storage, virtualization and the acceleration of MySQL adoption," Lim said. "As per the fiscal year 2009 second quarter earnings, these growth-related products would provide about US$2.8 billion of annualized revenues for Sun."

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