RealTime IT News

Sun Still Sees Return to Profits by June

Sun Microsystems Inc. on Thursday said it lost money in its fiscal third quarter -- the fourth time in a row it recorded quarterly loss -- citing a 24-percent decline in revenue but officials still expect to return to profitability by the end of its fiscal year 2002 in June.

The Palo Alto, Calif.-based workstation maker reported net losses of $37 million, or 1 cent a share, for the quarter ended March 31. The company hasn't been profitable since the third quarter of last year when it made $136 million, or 4 cents a share, in profits. Revenue dropped from $4.1 billion to $3.1 billion in the latest period.

The loss was slightly narrower than anticipated but the revenue came in at the low end of expectations. So far in fiscal 2002, Sun lost $648 million, or 20 cents a share, mainly on restructuring costs. Revenue totaled $9 billion through the first nine months of the fiscal year.

Despite four consecutive quarters of losses, Chief Financial Officer Michael Lehman said on a conference call that it still stands behind its commitment to return to profitability by the fiscal fourth quarter ending in June. The firm anticipates that inventory levels and cost reductions will help with this endeavor. Although there's been no official word of a hiring freeze, Sun officials confirmed the goal is currently to maintain a flat headcount while reducing total number of employees through attrition. In addition, Sun last October announced the reduction of 9 percent of its workforce.

"From our HR perspective, it's more about making our employees on board more effective than hiring," a company spokeswoman said.

Going forward, Sun expects revenue to be "up sequentially" from the latest quarter and see improvements in gross margins in June. But that still hasn't satisfied the critics.

"Sun's problems are deeper than just the collapse in business IT spending and nagging competitive signs," said Bill Whyman of the Washington-based Precursor Group.

In a research report, Whyman said Sun still faces the problems of monetizing its Java software and fighting IBM, which has become more aligned with arch-rival Microsoft.