Sun's 3Q Loss Lower Than Expected

Sun Microsystems

Sun's loss for its third fiscal quarter ended March 31 was $26 million, or 1 cent per share, beating consensus estimates from analysts at First Call/Thomson Financial, which predicted Sun would lose 2 cents per share. The loss also was a 67 percent improvement over Sun's loss of $431 million in the previous quarter.

Sun's revenue was essentially flat for the third quarter at $3.1 billion, the same as it was in the second quarter but a 39 percent drop from the $4.1 billion in revenue it reported in the year-ago quarter, executives said.

On a teleconference reporting earnings, Sun CFO Michael Lehman said Sun is negotiating the continued challenging economic environment well and is on track to return profitability in the June quarter as expected.

He also said Sun will reduce its employee head count by 1,000 in the next six to nine months as a result of finalizing a workforce reduction reported in December.

Following Lehman, Sun President and COO Ed Zander said he is extremely pleased by Sun's financials this quarter and attributed Sun's better-than-estimated results to several factors, including business predictability, growth in hardware revenue and Sun's increasing its market share over some big competitors.

"We continue to see a return to higher levels of predictability in our business--that's very important for a company," Zander said. "We also had our second straight quarter of sequential hardware revenue growth . . . and gained significant market share this quarter vs. IBM and HP."

Zander added that he is seeing new interest in Sun from HP customers--including two specific instances on sales calls in Florida this week--because of the impending HP-Compaq merger.

Zander also cited the strength of Sun's channel initiatives at this week's iForce conference as a reason for the vendor's relative stability in tough times.

"I just came back from iForce summit [where there were 1000 people working together to provide right solutions for customers," said Zander. "I said it once and again and again--customers want a best-of-breed, open, integratable model [like Sun ONE. I believe they will continue to choose that."

In addition, Zander said two announcements this week--the rebranding of software product lines under the Sun ONE name and Sun's new television and print ad campaign "We make the net work"--will spur Sun's growth in the coming year.

"We've seen a big interest in our Sun ONE message," he said.