Sun still flat in Q3, to shed 1,000 jobs

Sun Microsystems continued to experience relatively flat hardware sales in its third fiscal quarter, but managed to slightly exceed analysts' expectations, the company announced Thursday. In addition, the company will trim its workforce by 1,000 jobs over the next six to nine months.

Sun, based in Palo Alto, California, posted US$3.1 billion in revenue for its third quarter, ended March 31. In the same period last year, Sun generated $4.1 billion in revenue, the company said in a statement.

The company posted a net loss for the third quarter of $26 million, excluding losses from investments, tax charges and restructuring costs, according to the statement. This translated into a loss of $0.01 earnings per share. Analysts polled by Thomson Financial/First Call forecasted Sun would post a loss of $0.02 per share.

Including the charges, Sun's net loss was $37 million or a loss of $0.01 per share.

Sun's Chairman and Chief Executive Officer Scott McNealy said in the statement he was pleased the company was able to roll out new products despite the difficult economic conditions faced in the quarter. Sun announced its plans for new low-end Linux servers, new storage products and faster processors during the third quarter.

In addition, Sun said it plans to release a new version of its application server software this quarter.

Despite optimism about new products, Sun will shed 1,000 workers over the next six to nine months via attrition and reorganization, said Michael Lehman, executive vice president and chief financial officer at Sun, during a conference call with press and analysts. Sun experienced its first round of large-scale layoffs in the company's history last November, when it cut close to 4,000 jobs.

"While we made good progress, we are still operating in a very competitive environment," Lehman said, during the call. "Our results are still being hampered by reductions in IT spending. No one is exempt from feeling the effects on their business."

Despite increased pressure from rivals such as IBM Corp. and Hewlett-Packard Co. in the Unix server market, Sun claimed to have made large gains in market share during the quarter.

"We believe that in this past quarter Sun had the biggest market share gains against IBM in over a year," said Ed Zander, president and chief operating officer at Sun, during the call. As usual, Zander levelled several critical comments against IBM, saying the company's server business was hit hard in recent months, which proved that "you can only give away products for so long."

IBM has waged a fierce pricing battle against Sun, since the release of Big Blue's high-end p690 Unix server.

Zander said that customer activity appears to be increasing, although he has not seen an indication that orders will rise dramatically any time soon.

Still, the company reiterated its goal of reaching profitability in the next quarter.

Shares of Sun (SUNW) closed up over 3 percent on Thursday on the Nasdaq to end at $8.52 per share, ahead of the earnings announcement.

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