Sun Micro beats consensus, shares rally
By David Lawsky
SAN FRANCISCO (Reuters) - High-end computer and software company Sun Microsystems (JAVA.O) posted better-than-expected results as a strong software and open storage business cushioned declining overall sales, and its shares rose.
The company, which like rivals Dell Inc (DELL.O) and EMC Corp (EMC.N) is struggling with diminishing tech spending, posted an 11 percent decline in quarterly revenue.
Gross margins shrank to 41.9 percent from 48.5 percent a year ago.
Sun sold more storage products than analysts had expected.
"This is an expectations game and things weren't as bad as people thought, but trends are still eroding," said Brent Bracelin of Pacific Crest Securities. "It doesn't mean there is any sign of improvement, year over year."
Excluding restructuring and related impairment charges and including stock-based compensation and amortization charges, Sun posted a loss of 1 cent per share in the fiscal second quarter ended December 28, versus a consensus loss of 9 cents, according to Reuters Estimates.
Sun reported a profit of 15 cents per share, excluding charges for amortization and stock compensation, which Bracelin took as a positive sign.
"The company returned to profitability, while people were looking for it to lose money again," he said.
Sun again declined to give an outlook for the current quarter.
The company -- which is shedding up to 6,000 jobs or 18 percent of its workforce -- said it had a net loss of $209 million, or 28 cents a share for the quarter, compared with a net profit of $260 million, or 31 cents a share, a year ago.
The company reported revenue of $3.22 billion, compared with $3.62 billion one year ago.
At the end of the second quarter total software billings rose 21 percent year over year, and is now at an about $600 million annual run rate.
Billings on open storage products climbed by the same percentage to an annual run rate of about $100 million.
In contrast, total sales of server systems fell 9 percent in the quarter by volume, to about 80,000 units.
Sun Microsystems shares were up 6.5 percent in after-hours trading at $4.25, after closing at $3.99 on the Nasdaq.The shares embarked on a steady downtrend from May, when the company surprised investors with a quarterly net loss.
Goldman Sachs had added Sun to its "sell" list and cut its price target, saying the company's lack of a diversified portfolio put it at a competitive disadvantage.
Sun offers much of its software free in an open model, including a database and an office suite, seeking to foster its broad adoption. It sells other software, along with service and hardware.
Like much of the industry, the company is now struggling to slash costs as tech spending dissipates globally. It said in November it would cut 5,000 to 6,000 jobs, or 15 to 18 percent of its workforce, as part of a plan to save $700 million to $800 million a year.
Most of the Santa Clara, California-based company's competitors have similar plans. Sun competes against International Business Machines (IBM.N), Hewlett-Packard Co (HPQ.N) and Dell Inc (DELL.O) in the sale of server computer systems. It competes against EMC as a maker of data storage equipment.
Early this year, Sun acquired Q-Layer, a "cloud computing" company that does off-site storage.
source : Reuters
