Sun Tops Estimates in Second Quarter

Sun Microsystems on Thursday reported a second-quarter profit of $260 million, or 31 cents a share, a 94 percent increase from the year-ago quarter when it earned $133 million, or 15 cents a share.

Revenue in the quarter checked in at $3.61 billion, up slightly from the $3.56 billion it recorded in the same period last year. Gross margins for the quarter came in at 48.5 percent, up from 45 percent a year ago.

Analysts had been expecting, on average, earnings of 30 cents a share, on $3.59 billion in revenue, so Sun slightly edged out both revenue and earnings estimates.

On a conference call after the close of the market, the company announced it had repurchased 36 million shares and still had $800 million of the $3 billion allocated for stock buyback.

CEO Jonathan Schwartz said the company saw strong demand and solid bookings growth, particularly in emerging economies. The company reported double-digit growth in India, China, Latin America, the Middle East and Africa. India, he added, rose 25 percent while China and Korea rose 15 percent each.

Michael Lehman, CFO and executive vice president of corporate resources, said the numbers “reflect a great deal of progress toward our longer term business model and fiscal ’08 goals.” He noted deferred revenue increased 16 percent year over year, which reflected larger and more complex systems, requiring ongoing support.

Sun was impacted by a shift in its inventory system, called a “sell out” model, that Sun is moving toward with its channel partners. The company is trying to reduce the amount of product in the channel by shipping products only when they get customer orders.

As Sun moves to that model, it is taking a slight hit; it reported $120 million in deferred income this quarter because of it. Eventually this will balance out, said Lehman.

For the fiscal year, Sun expects revenues to grow by around 5 percent, with an operating margin of around 8percent. Margins for the upcoming quarter will be between 45 percent to 47 percent, and cash for the MySQL purchase will come from about two to three quarters of cash flow.

The company expects to start shipping its Intel-based systems in volume in the second half of this year, along with some new low-end, disk-based storage products.

Schwartz said in the quarter, Sun racked up more than 1,000 new customers buying Niagara and x86-64-based products. “We’re not just growing in our installed base. We’re doing our best to make sure we don’t trap ourselves by growing just within our current customers with our current products,” he said.

News Around the Web