Sun Microsystems returned to profitability in its third fiscal quarter despite a decline in revenue.

The hardware maker posted revenue of $2.79 billion, which is a ten percent drop from the $3.11 billion posted in the same quarter a year ago. Sun managed to squeeze out a profit of $4 million versus a $37 million loss last year.

The analysts present on a conference call appeared displeased with the results and peppered Sun executives with questions about the future of the Unix market and the potential of various growth areas.

Steve Milunovich of Merrill Lynch applied his razor sharp wit to Sun's problem by labeling the company a proprietary vendor and then noting that many proprietary vendors have struggled in the past. Milunovich, mind you, considers the Itanium processor an open platform.

Scott McNealy, CEO at Sun, was short with the Merrill whiz.

"I'm not quite sure I understand the question," McNealy said. "There is nothing proprietary about what we are doing."

McNealy pointed to the wide use of the Solaris operating system, Linux servers, SPARC and Java as indications of Sun's openness.

Sun is looking for its bets on new 32-bit Intel systems, the inclusion of its middleware stack with Solaris and upcoming multicore chips to help drive future growth into new areas, McNealy said.

The Sun chief pointed to Zones - which you first read about here that will ship with Solaris 10. Sun is betting on Zones as another way for SPARC systems to match Intel-based price performance. The Zones will let users split up servers into numerous different compartments each able to run their own software stack.

Sun saw total gross margin rise 2.5 per cent to 44.6 per cent of revenue over the corresponding period last year.®