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Sun, One of the Walking Wounded, Trying To Turn the Corner

Sun CEO Jonathan Schwartz: 'We are definitely seeing a slowing in the growth rate'
By Java News Desk
Article Rating:
May 1, 2007 09:30 PM EDT
Reads:
 13,212
Sun, one of the walking wounded, earned $67 million, two cents a share, on revenues up 3.3% to $3.283 billion in the March quarter. It lost $217 million this time last year.
 
This is the second time in a row it managed to squeak out a small profit after five quarters of losses but its revenues – which included a $54 million settlement payment from Microsoft – were less than the $3.42 billion the Street expected – and less than Sun expected – so its stock fell 11% Wednesday.
 
Sun CEO Jonathan Schwartz said, “We are definitely seeing a slowing in the growth rate.”
 
Wall Street wants to know what it’s going to do about the $5.4 billion it’s got stashed in the bank. Sun was not forthcoming.
 
Sun’s gross margin inched up 1.5% to 44.5%.
 
Despite a Q3 operating loss of $45 million, the company reiterated its goal of closing its fiscal year this quarter with an operating profit of 4%. Sun claims “continued progress operationally, strategically and financially.” It forecast a 15%-18% revenue increase this quarter over last attributed to seasonality.
 
It’s hanging a lot on the first of its Intel Xeon-based products, code named Constellation, due out in June. They will be blades that go up against blade leaders IBM and HP. Sun’s differentiation is that its widget will mix Opteron, Sparc and Intel blades with an operating system that run across all three. It also launched a video-delivery platform this week for cable and broadband operators that includes servers, networking components and storage.
 
It reported that fiscal Q3 sales got squishy at the end of March, particularly in the US and UK. Its low-end servers, beset by competition, and the disk side of its storage business were not strong. It confessed to being “a couple of percentage points off internal plans.” High-end servers evidently performed and Sparc constitutes the bulk of its business.
 
Unfortunately it looks like Sparc units were down and probably Sparc revenues along with it.
 
Product revenues came in at $2.06 billion, with systems down 8% sequentially to $1.5 billion after gaining back some market share last year. It blamed seasonality as well as purchase delays ahead of product refreshes. Services were down 5% sequentially to $950 million. It complained about indirect channels and said the verticals that didn’t perform were not its major turf, identified as federal, telcos and financial.
 
There were unspoken hints it might make further staff reductions, but there are no formal plans.

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Published May 1, 2007 – Reads 13,212
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Most Recent Comments
Bart Crethin 04/30/07 01:57:22 PM EDT

If having billions in the bank and profit makes you walking wounded, sign me up!!!
Java News 04/29/07 07:13:49 PM EDT

Sun, one of the walking wounded, earned $67 million, two cents a share, on revenues up 3.3% to $3.283 billion in the March quarter. It lost $217 million this time last year. This is the second time in a row it managed to squeak out a small profit after five quarters of losses but its revenues - which included a $54 million settlement payment from Microsoft - were less than the $3.42 billion the Street expected - and less than Sun expected - so its stock fell 11% Wednesday. Sun CEO Jonathan Schwartz said, 'We are definitely seeing a slowing in the growth rate.'