Original URL: http://www.theregister.co.uk/2008/01/24/sun_q2/

Sun shrugs off product slip in Q2

Services carry the load

By Ashlee Vance

Posted in Financial News, 24th January 2008 22:09 GMT

Despite falling product revenue, Sun Microsystems posted decent enough second quarter results.

Sun's overall revenue rose 1.4 per cent year-over-year to $3.62bn. But it was Sun's services division and not the core hardware units that did the dirty work. Product sales fell to $2.25bn from $2.26bn in the same period last year. Meanwhile, services revenue rose to $1.37bn from $1.31bn.

Sun also benefited from effective cost-cutting measures and higher gross margins. These factors helped the company post net income of $260m for the second quarter, which compares to net income of $133m last year. The 2008 second quarter net income total includes $32m in restructuring charges.

"Today's results clearly demonstrate steady progress against our financial targets and highlight the accelerating demand set to fuel growth in the back half of the fiscal year," said Jonathan Schwartz, CEO of Sun Microsystems. “Headlining the results were improved margins and strong bookings along with double digit growth in emerging markets including India, China, Latin America, Eastern Europe, the Middle East and Africa."

Sun has been suffering from falling shipments, but has offset some of those losses by moving higher-margin gear. In addition, the company has been trying to remove costs in every way possible, including layoffs and the reworking of its internal IT systems.

Investors earlier this month received the second quarter basics, when Sun released preliminary results for the period in conjunction with its announcement on the $1bn MySQL acquisition.

Sun's shares – already up close to nine per cent during regular trading – rose two per cent in the after-hours markets after investors received today's more detailed Q2 report. ®