Sun’s modest profit eclipsed by revenue decline

14 Jan 2005

Sun Microsystems last night reported a second-quarter profit of 1 cent per share, or US$19m, as revenues decreased 1.6pc to US$2.8bn. However, the company found a chink of light in the fact that the slight profit contrasted with a net loss of US$125m this time last year.

Net profit for the second quarter of fiscal 2005 included a charge of US$24m for previously announced workforce and real estate restructuring, a US$9m gain on equity investments and a US$6m benefit for related tax effects.

Last May, Sun confirmed that 24 workers at its East Point Strategic Software Development Centre in Dublin were to be made redundant. A further 180 jobs at Sun in the UK were also to be cut following a decision by Sun to cut 3,300 jobs worldwide – approximately 9pc of its workforce – following an earnings warning in April that saw net losses of around US$800m.

Sun reported that cash generated from operating activities was US$52m for the quarter, and the cash and marketable debt securities balance increased to US$7.464bn.

“The second quarter delivered many positives, including x64 and x86 server unit volume growth, positive cash flow from operations, and stunning market reviews of Solaris 10. It feels good to ring up a modest profit,” said Scott McNealy, chairman and chief executive officer, Sun Microsystems.

“Sun has one of its most rock solid product line-ups in history today. Innovation is increasingly marked by business models as much as technology. Sun’s US$1 per CPU/hour and the Sun Java Enterprise System are emerging models for recurring revenue. We are clearly reestablishing relevance in key markets,” McNealy said.

Steve McGowan, Sun’s chief financial officer and executive vice-president, corporate resources, added: “We’re pleased with our progress this quarter toward achieving our key financial goals. On a year-over-year basis, we increased our gross margin percentage, improved productivity by reducing research and development, and expenses by US$136m and continued to generate positive cash flow from operations. This was all accomplished without compromising our product roadmaps.”

By John Kennedy