The Sun Finally Sets

Sun Microsystems earnings

Sun Microsystems today reported the results of its third fiscal quarter ended March 29 — and if this is indeed its final quarter as an independent company, it was a pretty harsh way to conclude things.

Sun (NASDAQ: JAVA), which had previously agreed to be acquired by Oracle for $7.4 billion, reported a net loss of $201 million, or $0.27 per share, a significant drop compared with the net loss of $34 million, or $0.04 per share, for the third fiscal quarter of 2008.

Sun’s net losses included a restructuring charge of $46 million primarily related to the restructuring announcement of November 2008.

Minus one-time charges, net loss for the third quarter of fiscal 2009 was a little better — only $52 million, or $0.07 per share. Wall Street had expected losses of $0.19 per share, according to Reuters Estimates.

However, that compares less favorably against income of $132 million, or $0.17 per share, for the third quarter of fiscal 2008.

Revenues for the third fiscal quarter totaled $2.614 billion, a 20 percent decline from the $3.266 billion Sun earned in the third quarter of fiscal 2008, and the $3.220 billion it took in during its second fiscal quarter. The quarter’s performance also came in below analyst consensus of $2.85 billion, according to Reuters Estimates.

Despite the bleeding, Sun still managed to generate $178 million in cash from operations during the quarter, it said. Its burn rate — the amount of cash spent in operations — was a very stingy $18 million.

The company also claimed some bright spots, including a 4 percent growth in year-over-year billings in key areas like Open Storage, Sparc CMT and x86 servers.

Total software billings grew 28 percent year-over-year, Open Storage billings grew 63 percent year-over-year and Solaris-based SPARC CMT Servers billings grew 3 percent year-over-year.

Sun today said it would not be hosting its usual conference call to discuss the results and to give future guidance — for one thing, if its acquisition by Oracle (NASDAQ: ORCL) continues on pace for a summer conclusion, its executives won’t be able to make forecasts.

Josh Farina, an analyst with Technology Business Research, noted that Sun’s hardware sales were down 25 percent year-over-year, while IBM was down 20 percent over the same time period — so Sun is only faring a little worse than the strongest player in the game.

He took that to mean the majority of Sun’s slide was due to the economy and not uncertainty for the future of Sun.

“They’ve had such trouble over the past few years but they remained a top-three system vendor in the U.S.,” Farina told “Even with all their challenges over the past few years, they remained a key competitor. The technology was sound and customers sought it out.”

As recently as the fourth quarter, Sun was hanging in there, with its expensive Unix servers still maintaining their sales against cheaper x86 servers, according to analyst figures.

But eventually, economic ails caught up with them. Farina expects x86 to recover first as well — bad news for Sun, which has a marginal x86 business.

“We’re looking at it and thinking maybe we’re at bottom on declines in x86 [server sales] and maybe see some pickup later in the year but it will be a little longer cycle for SPARC,” he said. “We see operational budgets open up more before capital budgets, and x86 is more of an operational expense than Unix and mainframe systems, which fall into [capital expenditures].”

Farina said he didn’t know why Sun agreed to its quickie marriage to Oracle, especially since it held on through the quarter, but has his theories.

“It could be [Sun] thought they couldn’t scare off another big vendor,” he said, referring to an earlier, almost-coupling with IBM (NYSE: IBM). “It’s likely the board didn’t see much more value down the road if they waited. This might have been the last, best option,” he said.

Oracle, at least, has made its intentions clear in snapping up Sun. The acquisition is aimed at enabling the database giant to deliver a complete solution to enterprises, encompassing hardware, operating system, database and middleware — the latter courtesy of Oracle’s Fusion offerings, which are based on Java.

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