Sun on track for Q4 profit despite slow spending

Sun Microsystems is sticking by its earlier forecast for a return to profitability in its fourth fiscal quarter ending June 30, although revenue still is expected to be down from a year ago because of continued weakness in IT spending.

Sun sees no reason to revise the financial guidance it offered on April 18, when it said it expected to report a profit for its fourth fiscal quarter, said Michael Lehman, Sun's chief financial officer, during a mid-quarter update on Thursday. On April 18 the company also predicted a slight sequential uptick in revenue and gross margins.

Orders are lagging slightly behind where they were at the midpoint of the third quarter, but that is "not of great significance" and shouldn't prevent the company from meeting its targets, he said.

Analysts expect the Palo Alto, California, server and software maker to report earnings of US$0.01 per share for the quarter, compared to pro forma earnings of $0.04 per share in the same quarter last year, according to Thomson Financial/First Call. Revenue is expected to be $3.33 billion, down sharply from last year's $4.0 billion, First Call said. Sun is due to report results July 18.

For the third quarter, Sun reported revenue of $3.1 billion, down from $4.1 billion a year earlier. Its pro forma loss for the quarter, of $0.01 per share, was a penny less than analysts had been expecting. [See, "Sun still flat in Q3, to shed jobs," April 18.]Sun has been hit relatively hard in the past year by the worldwide slowdown in corporate IT spending. When it reported its third-quarter financial results on April 18 it said it would shed about 1,000 workers by the end of the year, adding to 4,000 jobs that it said last November it would need to cut. Those were the first large-scale layoffs in Sun's history.

On Wednesday, Sun launched a new version of its operating system, Solaris 9, which adds a directory server, an application server and other features intended to broaden the functionality of its software and help it to attract new users. Ahead of the news, Sun's shares (SUNW) on Nasdaq climbed 0.95 percent in Thursday's trading to close at $7.41. The stock slipped to $7.09 in the after-hours markets, according to the Island electronic trading system.

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