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Sun gives workers the okay to 'feel good again'

34,600 staff take a deep breath

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Sun Microsystems has given the official word – its employees can hold their heads high.

"Inside the company, the energy level is dramatically different," said Sun CFO Mike Lehman. "(The employees) are proud to say where they work again."

An ebullient collection of Sun executives and staff dished out various versions of this same message, during a financial analyst conference here. With a second quarter profit behind it, Sun is feeling the love – some of it self-inflicted, some of it parsed out by Wall Street. The chipper attitude conflicts with five years of past conferences when Sun tried its very best to show signs of life, while the analysts scoffed.

Things, of course, aren't fantastic at Sun, but they are looking better.

Sun's core SPARC-based server business showed 18 per cent revenue growth last quarter, while its x86 server business grew as well. The software team has moved more than 7m Solaris licenses - 70 per cent on rival hardware. The company also enjoyed some healthy additions from software and services, while storage remained the place where Sun's profits go to die.

For that reason, Schwartz spent an unprecedented amount of time selling Sun's latest storage charge.

The CEO attacked storage makers selling specialized boxes with proprietary operating systems. So-called storage controllers, in particular, can be replaced by general purpose servers such as Sun's x4500 hybrid server/storage box, according to Schwartz.

"We plan on being one of the principal suppliers of (that type of product)," he said.

Increased storage sales could boost Sun's gross margins, while also opening up a path to pricier management software. Sun, however, has tried and failed at improving its storage business so many times that it's hard to embrace the optimism.

The Thin Black Line

Back to the financial basics, Sun vowed to fight the mass layoff urges of Wall Street.

"We do not intend to go out and have a big layoff . . . because we need to run out business," Lehman said.

Not firing people does help boost worker pride.

But employees might be concerned with some of Lehman's other statements. The CFO pledged to cut Sun's research and development and SG&A expenses. Sun will also keeping getting rid of campuses "one lease at a time".

"Our cost structure is still too high. We know that. We understand that," Lehman said.

Sun is currently in the process of a $200m Oracle 11i rollout that it claims will also lead to lower costs – one day.

Heads up, Oracle team. ®

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