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Sun squeezes its loss
Profitability on the horizon?

By Reuters

Published: Friday 27 October 2006

Computer maker Sun Microsystems on Thursday posted a narrower quarterly net loss as revenue rose 17 per cent, helped by its acquisition of tape storage company StorageTek and growth in its services business.

Sun reported a net loss for its first fiscal quarter ended 1 October of $56m, or 2 cents per share, compared with a year-ago net loss of $123m, or 4 cents per share. Revenue rose to $3.19bn from $2.73bn.

Brent Bracelin, an analyst at Pacific Crest Securities, said: "Revenue growth was not as high as some had hoped. The important thing is the company continues toward its goal of reaching profitability."

Sun's net loss and its loss before items were narrower than analysts expected. The company noted, in addition to growth in its services business, a 15 per cent revenue increase at its computer systems products business, which includes servers.

Excluding items, Sun said it had a loss of 1 cent per share. Analysts polled by Reuters Estimates had expected a loss, on that basis, of 4 cents, on revenue of $3.18bn.

In the past five years, Sun has completely revamped its product line, embracing Opteron processors from AMD for use in so-called industry-standard servers. Sun chief executive Jonathan Schwartz, who took the reins in April from company co-founder Scott McNealy, has also cut jobs by some 13 per cent in a bid to help return Sun to profitability.

As is customary with Sun in recent quarters, the company did not provide a forecast for revenue or profits per share in the current quarter.

Sun shares have risen 29 per cent so far this year, rebounding since July after a sharp sell-off in the first half of the year, reflecting a broad-based rise in technology and US stocks.

Shares of Sun rose 6 cents, or 1.1 per cent, to close at $5.36 on Nasdaq. In extended composite trade, the shares dipped to $5.29, a decrease of 1.3 per cent.