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Sun Microsystems lost money and saw revenues fall for the fourth consecutive financial year as the former darling of the dotcom-era computing continued to struggle.

Nevertheless, Scott McNealy, chief executive, sounded an upbeat note. Revenues had been “stabilised” during the year, he said, with expenses cut and new products in the pipeline.

“We feel we've done what we needed to do to move the company into growth mode. Sun is set up to have a very successful 2006,” he said.

The Silicon Valley-based company was one of the most successful of the dotcom era as corporate buyers of information technology flocked to its high performance computers built around proprietary hardware and software. But sales slumped in the post-bubble period as customers migrated towards less expensive alternatives.

Sun last delivered an annual profit in fiscal 2001, the year its revenues peaked at $18bn.

Revenues in the three months to June declined 4.3 per cent to $3bn, bringing total revenues to fiscal 2005 to $11bn, down from $11.2bn. The net loss for the year was $11m.

Fourth quarter net income was $121m, or 4 cents a share, down from $783m or 23 cents a share.

However, profits for both were distorted by large one-off items including a $190m tax benefit and last year's $1.6bn legal settlement with Microsoft. Excluding one-off items, net income was $200m or 6 cents a share, compared with a net loss of $173m or 5 cents a share.

Investors were encouraged by signs that Sun could be on the verge of returning to the black. The stock gained 18 cents - or about 5 per cent to $4.03 following the announcement, which came after the close in New York.

Mr McNealy has defied critics during Sun's lengthly downturn by maintaining relatively high spending on research and development. The company spent $1.7bn on R&D during fiscal 2005, down from $1.9bn.

This investment was starting to pay off, he said, as the company launched new products. In the three months to June, revenues from the US were up 20 per cent compared with the previous quarter but down 13 per cent compared with 2004.

Sun finished its financial year with $7.5bn of cash and marketable securities on its balance sheet. Following the acquisitions of StorageTek, a data storage company, and Seebeyond, a software company, the cash pile will be reduced to about $3bn.

Both transactions are expected to close during the current quarter.

Copyright The Financial Times Limited 2019. All rights reserved.

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