Feeds

Investors stunned by Sun's apparent health

Q4 pumped full of black ink

Boost IT visibility and business value

Shares of Sun Microsystems jumped close to 10 per cent in after-hours trading, as the hardware maker posted strong fourth quarter results. Longtime Sun followers, however, may be less moved by the figures since Sun relied more on cost-cutting than sales to improve its bottom line.

Sun posted fourth quarter revenue of $3.84bn - a figure almost even with last year's revenue of $3.83bn in the same period. But Sun's Q4 net income came in at $329m - a vast improvement over a $301m loss one year earlier. The company was obviously aided by a number of cost-cutting moves, including layoffs, and stronger gross margins.

For the full year, Sun reported a 6.2 per cent rise in revenue to $13.87bn and a profit of $473m, which compares to a $864m loss last year.

"This is a great day for Sun," said CEO Jonathan Schwartz, during a call with analysts.

Sun has been working hard to trim costs by reducing its workforce and by improving its own back-end technology. And the company deserves credit for making the most of these moves and beating analyst expectations on the costs front. The company now seems able to post profits with consistency even during so-so quarters, which is what you want in a turnaround story.

Still, Sun has a lot of questions to answer around its core server line. Server revenue has been stagnant to falling over the past few months.

Schwartz attributed some of the server slowness to virtualization technology, which he claims has caused customers to buy fewer boxes. Over the long haul, this trend should benefit Sun with customers buying larger systems to handle lots of applications in one go, he said.

We're not ready to swallow either side of this story and believe that virtualization will have little impact on overall server purchases. Customers always seem to find a way to consume more boxes when given the chance. In addition, Sun has yet to prove it can outflank HP, IBM, and Dell with virtualization, since they have closer historic ties to VMware.

On the plus side for Sun, sales of its x86 servers rose 39 per cent year-on-year. In addition, its Niagara-based systems saw 225 per cent growth, while sales of its X4500 - aka Thumper - storage boxes reached an annual run rate of $100m. Sun's revamped blades hit an annual sales rate of $55m.

Overall, Sun's fourth quarter product revenue came in at $2.49bn, which compares to $2.52bn in last year's Q4. Services revenue hit $1.34bn - up from $1.30bn.

For the full year, Sun's product revenue grew to $8.77bn from $8.37bn. Services revenue reached $5.1bn from $4.7bn.

Sun declined to provide first quarter revenue guidance but said it expects full fiscal 2008 revenue to rise by "the low to mid single digits." ®

The essential guide to IT transformation

More from The Register

next story
The Return of BSOD: Does ANYONE trust Microsoft patches?
Sysadmins, you're either fighting fires or seen as incompetents now
Microsoft: Azure isn't ready for biz-critical apps … yet
Microsoft will move its own IT to the cloud to avoid $200m server bill
Oracle reveals 32-core, 10 BEEELLION-transistor SPARC M7
New chip scales to 1024 cores, 8192 threads 64 TB RAM, at speeds over 3.6GHz
Docker kicks KVM's butt in IBM tests
Big Blue finds containers are speedy, but may not have much room to improve
US regulators OK sale of IBM's x86 server biz to Lenovo
Now all that remains is for gov't offices to ban the boxes
Gartner's Special Report: Should you believe the hype?
Enough hot air to carry a balloon to the Moon
Flash could be CHEAPER than SAS DISK? Come off it, NetApp
Stats analysis reckons we'll hit that point in just three years
Dell The Man shrieks: 'We've got a Bitcoin order, we've got a Bitcoin order'
$50k of PowerEdge servers? That'll be 85 coins in digi-dosh
prev story

Whitepapers

5 things you didn’t know about cloud backup
IT departments are embracing cloud backup, but there’s a lot you need to know before choosing a service provider. Learn all the critical things you need to know.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.
Rethinking backup and recovery in the modern data center
Combining intelligence, operational analytics, and automation to enable efficient, data-driven IT organizations using the HP ABR approach.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.