Sun Q3 net income exceeds expectations

Sun Microsystems Inc. reported third-quarter net income Thursday that is slightly higher than analysts' expectations. The company's revenue for the quarter increased slightly over the same period last year.

Sun pulled in $263 million in net income, excluding additional charges, which translates into $0.08 earnings per share. Analysts polled by First Call/Thomson Financial predicted that Sun would earn $0.07 per share for the quarter in a consensus estimate.

The net income, however, was 43 percent less than the $464 million in net income obtained in the third quarter last year, a reduction caused by the U.S. economic slowdown, Sun said.

"Our results reflected the sharp decline in capital spending in the information technology sector, principally in the United States, although we did see some moderation of demand in Europe and Asia Pacific," said Michael Lehman, vice president and chief financial officer at Sun, in a statement.

The hardware maker took in US$4.1 billion in revenue for the period ending April 1, a 2 percent increase over the same quarter last year.

Sun warned the industry of a third quarter slowdown back in February when the company told analysts that earnings would likely fall below expectations. Like many in the IT sector, Sun experienced a sharp decline in product demand as 2000 came to a close. Company officials, however, repeated their mantra of market-share growth, saying Sun would fare well against hardware competitors. In particular, the officials cited November figures from market research company International Data Corp. (IDC), which they said showed Sun increasing its lead over rivals in the Unix server market.

Sun has increased its focus on data storage and server appliance products. The company hopes to generate new streams of revenue by dedicating more resources to its server division. Sun has also acquired several storage vendors and is working on integrating these companies' technology into its own storage lines.

The server appliance products can give customers a cheaper alternative to servers and were pushed heavily by Ed Zander, president and chief operating officer at Sun, earlier this week at a Sun customer conference. These appliances have embedded software which makes their operation more simple than a server for network administrators and helps them handle specific tasks such as streaming information or processing mail requests, according to Sun.

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