Sun profits evaporate as darkness falls on US economy
Investors run despite $1bn share buyback promise
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Sun promised to buy back $1bn worth of shares from stockholders today as it announced static revenues and a slump in fourth quarter profits.
Revenues came in at $3.78bn for the quarter ending June 30, down 1.4 per cent on the year. Profits collapsed though, coming in at $88m, compared to last year’s $329m. This resulted in earnings per share of $0.11. Once charges were flushed through, including around $100m of restructuring costs, EPS came in at $0.35. Wall Street had expected $0.25 per share.
The figures were generally to the top end of the range the company predicted in a nerves steadying statement it put out two weeks ago.
CEO Jonathan Schwartz said that while it was making “significant improvements across a number of key operating metrics” and was showing good non-US growth, the firm had been battered by “slowing performance” in the US.
But Schwartz’s take, and the better than expected EPS, did little to steady investors' nerves, and Sun shares were already down over 8 per cent in pre-market trading at time of writing.
This despite the firm announcing it would spend another $1bn repurchasing shares. Sun said that with $3.3bn in cash and marketable securities on its balance sheet, the buyback “reflects [the board’s] confidence in the continued growth of Sun’s business and an ongoing commitment to increase shareholder value”.
The latest buyback follows a $3bn scheme announced at the end of last year. Sun said there was still $36m of that scheme remaining. There is no expiration date on the current program.
Sun’s statement this morning gave no forecast for the year ahead, other than to say, “we remain confident in open source innovation as the accelerant to our growth strategy through increased adoption of our open source offerings”. In fact, the whole earnings statement only used the word server three times.
For the full year, sales came in at $13.9bn, virtually static on the previous year, with net income at $403m, down on last year’s $473m. ®
COMMENTS
RE: Victor
"HP should not be cataloged in the "same economy as Sun"... the biggest source of revenue for them is the printer's cartridges and Sun doesn't sell printers or cartridges. If you are talking volume, Sun doesn't sell volume, unlike IBM and Dell... Sun is not as diversified as the others, so they are HARDLY in the "same economy" as them"
Really? Look back a bit and you'll realise that HP, IBM and FSC all looked at the market and diversified. Sun did not. They all worked hard in the pre-Y2K boom to build up proprietary server business, but only Sun let blinkered rheotoric and short-sightedness stop them expanding into other areas. Sun's pigheaded management destroyed any chance of working with Intel and Microsoft or the Linux community until it was too late; didn't look into storage but merely assumed third parties like EMC would give Sun some sort of preferential treatment; didn't diversify their software beyond the proprietary UNIX server-client arena, making no efforts to produce for example management software like HP's OpenView range; and didn't even consider the possibility of peripheral areas such as printing, which they looked down on as some kind lesser technology. The writing was on the wall long before the dot-com bubble burst, it was just Sun's management's egos couldn't let them read it. Sun are in the same economy, it's just they've consistantly made the wrong choices, so is it any surprise the markets and Sun's customer don't believe in them now?
@And the good folks left
Would have to agree with there, AC. Just a lot of dead wood in the Sun store and the Cloud blotting out the Sunshine.
And that video of MrNealy ... http://www.youtube.com/watch?v=SAnoSgzk1Cc ...just proves that they've lost their way. Who works with archives whenever they are building the Future. It just smacks of holding onto past glories and that leaves everyone trailing in the race ahead.
And a Jack of all Trades is a Master of None....... especially one who thinks he been there, done that, got the T-shirt.
The Problem for any Business which has Problems is always Right at the Very Top in the Vertical Stack and not in the Horizontal Plane of ITs Applications.
HP and IBM are at 5 year highs...Sun...12 year low
Sun's SPARC products are end of life
Sun is trying to get their customers to buy Fujitsu SPARC
Sun is holding onto the "Open Source" Nirvana message and customers are looking to reduce costs
Sun is talking virtualization but does not have a good virtualization product
Sun spent a "cool billion" on MySQL ... I bet they could have gotten it for $250M...or better yet resolved their Oracle relationship problem
I guess after 5 years of begging them to let Sun buy them the price went up http://www.youtube.com/watch?v=d3mSvARJsTg
Anyone on Sun gear from the dot com boom is either looking to get off of SPARC or but cheap Sun stuff until they can move.
Sun bought STK for $2B and the combined revenue is negative....some naive press look at Sun's revenue from 2004 to today and see compound growth and forget they bought STK and they are both treading water.
Sun's optimism is a broken record
KKR will either buy them or dump them....
Sun is no longer a "large cap" stock....the selling has just begun
Sun wasted $3B in the last 6 months buying stock trying to get the stock to go up...and it is at a 12year low...now they play to buy $1B more
The only smart people are dumping Sun or shorting the stock....the stock short is Unreal
It does not help when every employee wants their CEO fired...and you have McNealy engaged again trying to help his successor who is failing
The "chairman of the board" is the lead sales rep
"70% of the world data resides on a Sun platform"
McNealy is smoking dope in his retirement...he is not even playing hockey any more.....and apparently he broke his leg so his golf game is gone.
http://www.youtube.com/watch?v=SAnoSgzk1Cc
Scott...you told the board they need a new basketball coach...and they begged you to stay...the time is now to get a new CEO and Chairman...be a man...don't let friendship and emotions kill your baby.
Robby Krieger
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