Sun squeezes profit out of fourth quarter

Sun Microsystems Inc. managed to bring its fourth fiscal quarter into the black after three losing quarters, saying on Thursday that low-end server and storage hardware sales helped its numbers.

Sun posted revenue of US$3.4 billion in its fourth quarter ending June 30. Net income for the quarter came in at $28 million or $0.01 earnings per share, excluding charges for investment losses, restructuring costs and benefits from tax effects, the company said in a statement. Including these items, Sun showed net income of $20 million.

The consensus estimate for Sun's earnings per share by analysts polled at Thomson Financial/First Call was $0.01. The company has trimmed costs through layoffs and cutbacks on some development programs.

For its full fiscal year, Sun reported $12.5 billion in revenue, down 32 percent from fiscal 2001. Overall, the company posted a net loss of $255 million for 2002 or a loss per share of $0.08, excluding charges. Taking restructuring charges, investment losses, research and development and tax effects into account, Sun posted a loss of $628 million or a loss of $0.19 per share, the company said in a statement.

Sun cited gains on the low end of the market this quarter for 2-, 4- and 8-processor server sales. In addition, the company's popular V480 server helped spark sales, Sun said in the statement.

Rivals such as Dell Computer Corp. had been making progress against Sun with their 1- and 2-processor Intel Corp.-based servers, but Sun, based in Santa Clara, California, claimed it gained market share growth in this segment for the quarter. It also said storage hardware revenue grew in the quarter.

Despite some positive signs, Sun executives said they don't expect a near term rebound in technology spending.

"The bear is pretty strong in the computing business right now," said Scott McNealy, chairman, chief executive officer and president at Sun, in a conference call with press and analysts following the earnings release.

Sun expects to post a slight loss in its first fiscal quarter of 2003. The company has forecast earnings per share between $0.10 and $0.15 for fiscal 2003 as a whole, said newly appointed Chief Financial Officer and Executive Vice President Stephen McGowan, during the conference call.

Some analysts have called for Sun to make more cuts in its workforce, but McNealy said the company is planning for long-term growth by keeping current personnel and research and development spending levels intact.

"I like the server business," McNealy said. "It's a great place to be in the next 10 to 15 years."

Major rival IBM Corp. reported a 27 percent year-on-year revenue decline in its Unix server business in its second quarter results reported Wednesday. Sun attributed some of this fall to an overly aggressive pricing strategy from IBM.

"In Japan, like everywhere else, we are seeing IBM do very unnatural things," said Masood Jabbar, executive vice president of global sales operations at Sun, in response to a question from an analyst about Big Blue's pricing.

Sun also announced Thursday that Robert Youngjohns, vice president of Europe, Middle East and Africa at Sun, will immediately succeed Jabbar as head of global sales. Jabbar will stay on with Sun for some time to assist with the transition.

Looking at the results by region, Sun said its revenue surged 20 percent in the U.S. quarter-on-quarter. Executives noted that European and Japanese markets continued to be weak.

Shares of Sun (SUNW) were up over 2 percent to a close of $5.81 on the Nasdaq exchange. In after hours trading on the Island network, Sun's shares tumbled more than 11 percent to $5.04 at the time of this report.

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