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Sun pumps out a profit as shipments continue decline

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Sun Microsystems failed to blow away investors with its first quarter results but did hand in a decent performance.

The server maker boosted revenue by close to one per cent, hitting $3.22bn in sales. It also posted net income of $89m, which compares to a net loss of $56m in the same period last year. Sun managed to turn the profit even with $113m in restructuring charges from layoffs.

Sun has now cleared a profit in four straight quarters.

Crucially, Sun boosted its gross margins by 5 percentage points to 48.5. The company also brought in $574m in cash during the quarter, leaving it with $5.19bn to blow on another tape storage vendor.

Over the past couple of quarters, Sun has enjoyed product revenue growth but suffered from declining overall shipments. That trend played out again in the first quarter.

Sun's product revenue inched higher to $1.98bn from $1.96bn, while services revenue increased to $1.24bn from $1.23bn. Still, shipments of lower-end gear declined.

Overall, Sun's server shipments fell 2 per cent year-on-year. And Sun's still young x86 business only grew 7 per cent.

CEO Jonathan "My Little Pony" Schwartz bragged that Sun did manage to move a lot of high-end systems during the quarter and that it pushed plenty of identity management software. Schwartz continued to hit on the idea that customers are tending to buyer larger, "more richly configured" systems instead of 1U units in part because of the trend toward virtualization.

Sun's shares dipped slightly in after-hours trading, following the release of the first quarter results.

Looking forward, Sun expects revenue growth to grow in the "low to mid single digits". ®

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