Sun holds onto profit as revenue falls

More cash piled away

Cat 5 cable

Sun Microsystems continued to see revenue slump in its fourth quarter, as hardware sales remain tough to come by.

The server maker posted $2.98 billion in revenue for the period ended June 30. This marks a 13 percent decline compared to the same period a year ago when Sun pulled in $3.42 billion. Net income hit $12 million in the most recent quarter versus $61 million last year. It's good to see Sun stay in the black, but times are clearly tough.

On a positive note, Sun continued to generate cash from operations, which is one of CEO Scott McNealy's favorite items of note. Sun brought in $335 million in the quarter, leaving it with $5.7 billion in the bank.

For the full fiscal year, Sun posted revenue of $11.43 billion - an 8.5 percent decline from the $12.50 billion in FY02. Sun took a heavy net loss of $2.4 billion in 2003 due in large part to a $2.1 billion charge for its Cobalt acquisition. Gross margins improved 3.9 percentage points year-on-year to 43.2 percent.

Sun saw its services business revenue rise 7 percent year-on-year, while systems revenue fell 20 percent and storage revenue fell 16 percent. Sun did, however, see strength in high end server sales and a higher attach rate of storage to its own servers.

Sun plans to up research and development spending during the next year. The company often draws criticism from analysts for this practice, but Sun executives maintain R&D is key to its future as a company.

Sun said it has a backlog of orders for its V210 and V240 servers that amounts to $50 million. The company stopped shipping these systems due to a defective Broadcom chip, as first reported by The Register. The servers are to resume shipment in the coming weeks.

Sun's results closely mirror those of rivals IBM and EMC, which reported results last week. Hardware companies, in general, came in flat for the quarter. ®

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