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Another year, another revenue drop for Sun Microsystems. The hardware vendor today turned in fourth quarter and full year results that showed continued struggles to gain market share, ship high-end servers and sell storage.

In the fourth quarter, Sun posted revenue of $2.98bn - a 4 per cent drop from $3.11bn posted in the same quarter last year. Sun's revenue has been essentially flat now for three years during Q4.

The company, however, did beat analysts' expectations of 1 cent earnings per share by posting 4 cents earnings per share on the back of $121m in net income. Sun's net income of $783m from last year's fourth quarter is a tough comparison as it includes a large chunk of cash from the Microsoft settlement.

During the quarter, Sun took charges for workforce and real estate restructuring. Excluding these and other items, Sun reported net income of $200m

For the full year, Sun brought in $11.07bn - a drop of 1 per cent from the $11.19 posted in 2004. The net loss for the year was $11m versus a net loss of $388m last year. Excluding charges, Sun posted net income of $184m, which compares to a net loss of $791m, excluding charges, in 2004.

So, in a sense, the bleeding has stopped.

"Big time progress, I think, in 2005 on a number of fronts," said CEO Scott McNealy, during a conference call. "It sure feels nice to make money. That always feels good.

"We believe we have done what we need to do to drive this company into growth mode."

Sun detractors will be quick to point out that McNealy has talked about a return to growth mode for some time. The company, however, continues to be hurt by many of the same factors that cut revenue over the past three years, while struggling to pull in money from new ventures.

For example, product revenue dropped to $1.93bn during the fourth quarter from $2.07bn, and sank to $7.13bn in 2005 from $7.36bn in 2004. During the boom times in 2001, Sun reported $18.25bn in full year revenue.

Customers continue to shy away from Sun's highest-end systems. Servers with one to eight processors now make up 65 per cent of revenue. Sun enjoyed a significant sales increase of four and eight processor SPARC boxes. It also shipped 50,000 Opteron servers during the year. Sun's storage revenue fell 13 per cent, while it saw a healthy 43 per cent rise in JES (Java Enterprise System) subscribers during the fourth quarter, bringing total subscribers to 620,000. That's the most dramatic rise in JES sales in quite awhile.

Despite much pressure from analysts, McNealy would not confirm when Sun plans to release its new fleet of Opteron servers. Beta customers, however, do have the kit. Sun will also release servers based on its Niagara chip early next year, and the company has taped out both Niagara II and the Rock family of chips. ®

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