Sun posts second-quarter loss

Sun Microsystems Inc. unveiled its second-quarter results for fiscal year 2002 Friday, reporting revenue slightly higher than was expected for the quarter but still posting substantial losses compared to the same period last year.

In a conference call with analysts, however, Sun Chief Financial Officer (CFO) Michael Lehman said the company was on track to report a return to profitability in its 2002 fiscal fourth quarter.

"We have clearly made real progress over the last 90 days," said Lehman.

Sun's revenue for the quarter, which ended Dec. 30, 2001, came in at US$3.11 billion, a decrease of 39 percent compared to the second quarter of the previous year. The company did manage to post a sequential revenue increase of 9 percent from the first quarter of 2002 to the second quarter, however.

Net loss for the quarter -- excluding investment losses, restructuring costs, and other, one-time charges -- was $99 million, or $0.03 per share, a decrease of 121 percent compared to the net earnings per share in the year-earlier quarter.

A Thomson Financial/First Call survey of analysts predicted a second quarter loss of $0.04 a share and revenue of $3.09 billion.

Including investment losses and other special charges, the net loss for the second fiscal quarter was $431 million and the net loss per share was $0.13.

During the conference call, Sun executives touted the company's successful integration of a new products into their range of offerings, as well as a substantial inventory reduction.

During the quarter, Sun launched products and services including the Sun Open Net Environment (ONE), designed to help developers create and deploy applications over the Web, and started volume shipments of the Sun Fire 15K and the Sun Fire V880 servers.

However, Sun Chairman and Chief Executive Officer (CEO) Scott McNealy said that the terrorist attacks of Sept. 11, fierce market competition, and hefty restructuring charges posed serious challenges during the quarter.

"I'm kind of glad we put that year behind us," McNealy said.

Besides a sluggish economy and the effects of Sept. 11, Lehman said that increasing worldwide competition was taking a bite out of the company's profit margins. But CEO McNealy seemed confident that Sun could triumph over rivals, especially IBM Corp.

"We are in a ground war with IBM Global Services," McNealy said, "and we're not going to back off."

In its arsenal, McNealy cited the company's focus on products, its numerous partnerships and the Sun-initiated Liberty Alliance Project, which aims to create a common technology for identifying users on the Internet. The Liberty Alliance Project will compete with Microsoft Corp.'s .Net services including Passport, which offers Web surfers the ability to log on to multiple Web sites without re-keying personal information.

"We are very excited about the strong demand for our products," said Sun Chief Operating Officer Edward Zander.

Sun stock (SUNW) slid 0.89 percent to $12.26 after the results were announced.

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