Sun disappoints as sales lift 17%

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Sun Microsystems reported quarterly sales rose 17 per cent to $3.34bn, boosted by revenues from acquisitions, but sales and losses were worse than Wall Street expected.

The computer maker announced a net loss for its second quarter of $223m or 7 cents a share compared with a profit of $4m a year earlier. Excluding certain costs, the loss was 3 cents, compared with the analyst consensus of 1 cent gathered by Thomson Financial.

Sun has been forced to reorganise and cut costs after coming under pressure in the computer server sector it specialises in from rivals IBM, Hewlett-Packard and Dell.

Revenues were up on the $2.84bn recorded a year earlier but were helped significantly by the acquisition of Storage Technology in August. They fell short of market expectations of $3.49bn.

Sun shares dipped initially but were then flat at $4.37 in after-hours trading after Scott McNealy, chief executive, sounded bullish on the outlook.

“The backlog is the highest in years and this increase in bookings and demand is driving improved business fundamentals,” he said.

“The uptick in demand is due to the game-changing technologies we’ve delivered to market over the last several quarters that are setting new standards for performance, price and efficiency.”

He referred to its Sun Fire x64 servers, UltraSPARC IV+ and the new T1 processor code-named Niagara as creating excitement in the market.

“We’ve got to translate that into revenues and that’s the challenge,” he said.

Steve McGowan, chief financial officer, said gross margins of 42.6 per cent continued to be strong and operating expenses had been kept in line. The balance sheet remained strong with cash and marketable securities worth $4.3bn.

Sun said it had achieved customer wins in the quarter for its hardware and software products –- among others, American Express had chosen its Java Enterprise System software, Harrods department store ordered the Java Integration Suite and the Tokyo Institute of Technology chose Sun Fire x64 servers and software.

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